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Investing.com - Jefferies downgraded Electronic Arts (NASDAQ:EA) from Buy to Hold while raising its price target to $210.00 from $200.00 following news of the company’s planned acquisition. The stock, currently trading at $202.05, has surged over 16% in the past week and is trading near its 52-week high of $203.75.
The downgrade comes after Electronic Arts announced it is being taken private by a consortium that includes Silver Lake, Affinity Partners, and the Saudi Public Investment Fund (PIF) at a price of $210 per share.
The buyout represents a 25% premium over Electronic Arts’ previous share price, which Jefferies notes is higher than the approximately 20% premium that had been previously reported in earlier news.
Jefferies highlighted that the deal values Electronic Arts at approximately 21 times its ex-cash price-to-earnings ratio, which matches Activision Blizzard’s valuation from its 2022 acquisition. The firm also noted that Take-Two Interactive and Roblox currently trade at higher multiples and are "increasingly scarce assets" in the gaming sector.
The research firm sees "limited obstacles to closing or likelihood of additional bids," prompting the rating downgrade while adjusting the price target to match the $210 buyout price.
In other recent news, Electronic Arts is set to be acquired by an investor consortium for $210 per share in cash, valuing the company at approximately $36 billion in equity. This consortium includes Saudi Arabia’s Public Investment Fund, Silver Lake, and Affinity Partners. Additionally, there are reports suggesting that Electronic Arts may be taken private in a transaction valued at around $50 billion, potentially marking one of the largest leveraged buyouts in history. In light of these developments, several firms have adjusted their ratings and price targets for the company. HSBC downgraded Electronic Arts from Buy to Hold, citing limited upside potential, with a price target of $191. Benchmark, however, raised its price target from $200 to $250, maintaining a Buy rating. Wedbush also downgraded the stock from Outperform to Neutral, lowering its price target to $200. Freedom Capital Markets downgraded the stock to Hold but increased its price target to $195, reflecting a "rumored deal price."
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