Citi cuts Electronic Arts stock price target to $139 from $163

On Monday, Citi analyst Jason Bazinet adjusted the price target for Electronic Arts (NASDAQ:EA) shares, reducing it to $139 from the previous $163, while maintaining a Neutral rating on the stock. With EA currently trading at $122.91 and near its 52-week low, InvestingPro data shows the stock’s RSI suggesting oversold territory. The revision follows Electronic Arts’ updated guidance, which prompted changes to Citi’s financial model for the company.

Bazinet’s statement indicated a recalibration of expectations due to Electronic Arts’ recent guidance revision. The company had lowered its third-quarter fiscal year 2025 bookings guidance to $2.215 billion, down from the previously projected range of $2.4 to $2.5 billion. Similarly, the full-year fiscal 2025 bookings forecast was modified to a range of $7.00 to $7.15 billion, a decrease from the earlier estimate of $7.5 to $7.8 billion. This guidance revision aligns with InvestingPro data showing six analysts revising their earnings downward for the upcoming period.

In response to these adjustments, Citi has revised its own estimates for Electronic Arts’ future performance. The firm’s projections for net bookings and non-GAAP EPS (Earnings Per Share) for fiscal years 2025 to 2027 have been lowered. Specifically, the fiscal year 2025 bookings estimate has been reduced by approximately 8%, while the bookings estimates for fiscal years 2026 and 2027 have seen a decline of 2% to 4%.

The impact of these lowered bookings estimates is also reflected in the projected non-GAAP EPS for the same period. Citi now expects a 10-15% decrease in Electronic Arts’ non-GAAP EPS for fiscal years 2025 to 2027. Despite these lowered forecasts, the new price target of $139 still represents a valuation of roughly 19 times the projected fiscal year 2026 non-GAAP EPS.

The reassessment of Electronic Arts’ stock by Citi comes after acknowledging recent weaknesses in some of the company’s franchises, including EA FC and Dragon Age. While the company maintains strong fundamentals with a P/E ratio of 31.28 and market capitalization of $32.23 billion, InvestingPro analysis indicates the stock is trading at a high earnings multiple relative to near-term growth. The revised financial model and price target are a direct consequence of the updated company guidance and observed performance issues within these specific game titles. For deeper insights into EA’s valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.

In other recent news, Electronic Arts (EA) is set to acquire TRACAB Technologies, a move expected to enhance its sports simulations. This acquisition aligns with EA’s ongoing commitment to technological innovation in sports simulations. EA expects TRACAB’s technology to increase the authenticity of their games, providing near real-time insights for various stakeholders in the sports industry.

EA has also faced recent adjustments in analyst outlooks due to disappointing sales and a reduction in full-year bookings guidance for FY25. Firms such as Oppenheimer, Stifel, and Benchmark have adjusted their price targets for EA, reflecting the company’s recent financial performance. Oppenheimer analyst Martin Yang decreased EA’s price target to $140, maintaining an Outperform rating, while Stifel cut EA’s stock price target to $133. Benchmark maintained a Buy rating for EA, with a price target of $163, despite the company’s Q3 underperformance.

EA reported preliminary net bookings of $2.215 billion for the quarter, a 6% year-over-year decrease. The company’s Global Football franchise is expected to show mid-single-digit declines in FY25, and sales of Dragon Age fell short of expectations by 50%.

Despite these challenges, EA expressed confidence in its long-term strategy, anticipating a return to growth by fiscal 2026. These recent developments in EA’s financial landscape reflect the dynamic nature of the gaming industry and the ongoing market analysis by various financial firms.

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