DA Davidson sets EA stock target at $140 with Neutral rating

On Tuesday, DA Davidson initiated coverage on shares of Electronic Arts (NASDAQ:EA), starting with a Neutral rating and setting a price target of $140.00. With a current market capitalization of $33.5 billion and an impressive gross profit margin of 79.38%, DA Davidson’s analysis acknowledges Electronic Arts’ robust portfolio of intellectual properties, which provides a competitive edge that new market entrants may find challenging to replicate. According to InvestingPro data, EA maintains strong financial health with a "GOOD" overall rating.

Electronic Arts, recognized for its strong selection of gaming franchises, has been positioned as a company with a defensible moat due to its existing intellectual property. The analyst from DA Davidson noted the significance of this advantage, emphasizing the difficulty competitors face when trying to enter the gaming space against such an established player.

Despite the strengths identified within Electronic Arts’ portfolio, DA Davidson expressed caution regarding the company’s near-term prospects. This caution appears warranted, as InvestingPro data reveals that 13 analysts have recently revised their earnings expectations downward. The firm pointed out that there is considerable pressure on Electronic Arts’ forthcoming projects to compensate for its core business, especially as it approaches fiscal year 2026.

The coverage initiation comes with a careful stance, influenced by recent operational hurdles experienced by Electronic Arts, particularly with the Dragon Age franchise. These challenges have prompted DA Davidson to adopt a wait-and-see approach, preferring to remain on the sidelines until there is greater confidence in Electronic Arts’ capacity to drive growth with its non-annualized franchises and to expand its market share in non-sports gaming genres.

DA Davidson’s price target of $140.00 implies a forward price-to-earnings multiple of 19 times the firm’s forecasted normalized earnings for fiscal year 2026. Currently trading at a P/E ratio of 32.42, the stock appears richly valued by traditional metrics, though InvestingPro’s Fair Value analysis suggests slight undervaluation. This valuation reflects a measured optimism about the company’s ability to navigate the competitive landscape and grow its diverse gaming portfolio. Discover more detailed valuation insights and 6 additional ProTips for EA through an InvestingPro subscription.

In other recent news, Electronic Arts has seen adjustments to its stock price targets from several analyst firms following its third quarter results. TD Cowen lowered its price target to $160 from $183, maintaining a Buy rating, while UBS reduced its target from $160 to $138, keeping a Neutral rating. Benchmark also cut its target to $140 from $163, but upheld a Buy rating. BMO Capital Markets adjusted its target slightly from $145 to $142, retaining a Market Perform rating, and Goldman Sachs revised its 12-month target to $135 from $140, continuing with a Neutral rating.

These changes come in light of Electronic Arts’ recent financial disclosures, which revealed a disappointing performance in the Global Football segment, leading to a decrease in profits for the third quarter and a reduction in fiscal 2025 profit guidance. However, Electronic Arts expressed optimism about returning to growth in fiscal 2026, fueled by a resurgence in FIFA and the introduction of new titles such as Battlefield, skate, and College Football 26.

The analysts’ adjustments reflect a more conservative estimate of Electronic Arts’ growth prospects in the near term while still indicating a positive long-term outlook for the company. The success of Electronic Arts’ future performance is contingent on the company’s ability to resolve balance issues in the FC game and strategically time the release of upcoming titles.

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