Video game maker Electronic Arts Inc. is positioned to benefit from a widespread shift to "games as a service," wherein consumers will subscribe to video games rather them buying them outright, according to one team of bulls on the Street.

Analysts at Needham expect EA stock to rally over 20% to reach a newly lifted price target of $170, citing its booming subscription business, which the investment firm already pegs at around $3 billion in fiscal 2019. Needham analyst Laura Martin reiterated her buy rating on shares of the Redwood City, California-based entertainment company, comparing its business model to that of high flying FAANG component Netflix Inc. (NFLX). Martin views leaders in the subscription business across industries continuing to gain traction among younger consumers who have shown their willingness to pay monthly fees for key "tech utilities" such as music, movies and computer software. 

“It is our view that millennials want to rent content (eg, Spotify (SPOT), Pandora (P), Netflix, Hulu) rather than own it, and that content companies with data about what their consumers view/play/use create valuation upside from programming, eCommerce, and advertising revenue streams,” wrote Martin in a note to clients Friday. 

Renting Instead of Owning

Needham is upbeat on Electronic Art’s new "Origin Access Premier" subscription plan for PC gamers, which costs $14.99 per month or $100 per year and offers access to the biggest games as they are launched.

"If EA's new PC subscription service is successful, we expect EA to add a premium subscription tier for games played on Sony's PlayStation and Microsoft's Xbox," wrote Martin, adding, "EA aggregates both its own games and 3rd parties' (eg, Warner's), and has lower content risk than NFLX because EA owns its IP (or has long-term exclusive contracts)."

Shares of Electronic Arts closed down 1.3% on Friday at $141.26, reflecting a 34.5% gain year-to-date (YTD) and a 25.4% increase over 12 months, compared to the S&P 500's 3% return and 13.2% gain over the same respective periods. (See also: Spotify ‘Closest’ to NFLX for Music, Set to Soar: JP Morgan.)