Analysts: Investors Overreacted to Star Wars Battlefront 2 Loot Boxes, Ups EA’s Target Stock Price

Even after EA missed its projected sales for Star Wars Battlefront 2 thanks to the loot box controversy, according to analysts following the matter, investors have been overreacting to the damage it would do to EA.

Gamers may disagree, along with the governments in Belgium and Britain, but to Wall Street analysts like Gerrick Johnson, (Director at BMO Capital Markets), it’s all about money. In a note to his clients, Johnson offered a different point of view regarding EA’s stock price while also raising his target stock price for EA. He raised it from $97 to $130 (14.82%)

“While the cancellation of micro-transactions in Star Wars makes for an intriguing headline, the impact sounds much larger than it really is. Over the longer term, EA is experiencing a tailwind that is benefitting the entire video game software industry: the transition of physical software sales to digital downloads, which offer higher margins and the opportunity for incremental add-on sales and multi-player online services.

Consumer pushback to EA’s Star Wars in-game monetization strategy has undermined some investor confidence and has driven the stock lower. After further consideration, we believe the reaction may have been overdone, providing a buying opportunity for what is, otherwise, a solid long-term story.”

Johnson later continued, praising the unique approach EA took by organizing eSports competitions for its existing titles.

“Those participating, and hopeful of monetary prizes, don’t need to try out for established eSports teams. They can work their way up the ladder as walk-ons. We think this grassroots approach is smart, especially given the portfolio of games EA has to work with (we don’t think sports games transfer well to the professional league model). We believe this model will keep aspirational players engaged (and generating revenue) as they try to climb the ranks to become professionals.”

Loot boxes have been turned off in Star Wars Battlefront 2 for some time now, and neither developer DICE nor EA has given an update on whether or not they will be turned on again.