EA has price target slashed at Roth

A big stumble on the digital football pitch has Roth analyst Eric Handler cutting his price target on Electronic Arts (Electronic Arts Stock Quote, Chart, News, Analysts, Financials NASDAQ:EA).

On January 22, EA released preliminary third quarter results. The company warned of softer than expected earnings from its Global Football brand.

“During Q3, we continued to deliver high-quality games and experiences across our portfolio; however, Dragon Age and EA SPORTS FC 25 underperformed our net bookings expectations,” CEO Andrew Wilson said. “This month, our teams delivered a comprehensive gameplay refresh in addition to our annual Team of the Year update in FC 25; positive player feedback and early results are encouraging. We remain confident in our long-term strategy and expect a return to growth in FY26, as we execute against our pipeline.”

Handler says the situation is much more serious than many first thought.

“Although there has been rising speculation that EA FC had underperformed expectations, the magnitude of this revision is very surprising and makes us question how quickly a fix could take for the company’s top franchise,” he wrote. “Most of the issues are with Live Services, which points to Ultimate Team, EA FC for Mobile, and EA FC Online.”

In a research update to clients January 23, the analyst maintained his “Neutral” rating on EA, but cut his price target on the stock from $158.00 to $134.00.

Handler thinks EA will post EPS of $6.36 on revenue of $7.07-billion in fiscal 2025. He expects those numbers will improve to EPS of $6.70 on a topline of $7.22-billion in fiscal 2026.

“We are lowering our bookings and EPS estimates of $2.215bn (-6% and in line with updated guidance) and $2.68 (-10%), from $2.523bn and $3.44, respectively,” the analyst added. “Our forecast now assumes a 7.5% decline in Live Services (down from our prior +7% view) along with a 4% decrease in Full Game sales (down from +6%). Comparisons were expected to be challenging for EA FC coming up against 7% bookings growth in 3Q24 (including DD growth from Ultimate Team), which surpassed moderate growth expectations. EA FC was also benefiting from larger than normal marketing to promote the game’s first-year name change from FIFA. However, these issues were already reflected in the original guidance.”