On Wednesday, Stifel analysts responded to Electronic Arts’ (NASDAQ:EA) pre-announced fiscal third-quarter 2025 results by lowering the video game company’s price target from $159 to $133, while maintaining a Hold rating on the stock. According to InvestingPro data, EA’s stock, currently trading at $142.35, is near its Fair Value, with analyst targets ranging from $133 to $183. The company maintains a solid financial health score of "GOOD" and boasts a market capitalization of $37.33 billion. The adjustment follows Electronic Arts’ disclosure of weaker-than-expected launches for two of its major titles, EA Sports FC 25 and Dragon Age: The Veilguard, leading to a reduction in the company’s full-year 2025 guidance.
Electronic Arts reported preliminary net bookings of $2.215 billion for the quarter, a 6% year-over-year decrease, falling short of the previously forecasted range of $2.400 billion to $2.550 billion. This result was also below Stifel’s estimate of $2.456 billion and the consensus of $2.512 billion. The company has now set its full-year 2025 net bookings guidance to a range of $7.000 billion to $7.150 billion, representing a midpoint decline of 5% year-over-year, in contrast to the earlier guidance range of $7.500 billion to $7.800 billion.
The revised forecast suggests a fourth-quarter net bookings range of $1.444 billion to $1.594 billion, indicating a 9% year-over-year decrease, which is significantly lower than the previous implied guidance range. Furthermore, the company now expects live services net bookings to decline by mid-single-digit percentages for the fiscal year 2025, a stark contrast to the previously anticipated growth, implying a shortfall of around $400 million.
The reduction in guidance and subsequent price target adjustment by Stifel comes after EA Sports FC 25 and Dragon Age: The Veilguard underperformed, with both games attracting only 1.5 million players, which is 50% below Electronic Arts’ internal targets. InvestingPro analysis reveals that EA’s stock is currently showing oversold conditions based on RSI indicators, while trading at a P/E ratio of 36.47. Want deeper insights? InvestingPro offers 11 additional exclusive tips for EA stock, along with comprehensive valuation metrics in their Pro Research Report. Stifel had previously downgraded its rating on Dragon Age in mid-December and had identified EA Sports FC 25 as a potential risk in their earnings preview, but the extent of the underperformance reported was unexpected.
In light of these developments, Stifel has reviewed its model for Electronic Arts and has lowered its non-GAAP EPS forecasts for fiscal years 2025 and 2026 to $6.21 and $7.36, respectively, from the previous estimates of $7.62 and $8.39. Despite the guidance reduction, InvestingPro data shows EA maintains strong fundamentals with a revenue growth forecast of 2% and robust cash flows that sufficiently cover interest payments. The company’s next earnings report is scheduled for February 4, 2025, just 12 days away. The new price target of $133 per share is based on an 18.1x multiple of the firm’s fiscal year 2026 non-GAAP EPS estimate, which aligns with the stock’s three-year average.
In other recent news, Electronic Arts (EA) and Take-Two Interactive (NASDAQ:TTWO) have been under scrutiny due to significant changes in their fiscal outlooks. EA revised its fiscal year 2025 outlook to a mid-single-digit decline in live services net bookings, citing a slowdown in its Global Football franchise and lower-than-expected engagement with Dragon Age. Concurrently, Take-Two Interactive’s stock dropped in response to EA’s revised guidance, reflecting investor concerns over potential industry-wide implications.
Several financial firms have revised their outlooks on EA. Baird reduced EA’s price target to $158 while maintaining an Outperform rating, BofA Securities downgraded EA’s stock rating from Buy to Neutral and slashed the price target to $130, and BMO Capital Markets downgraded EA’s stock rating to Market Perform and reduced the price target to $145. Despite these adjustments, EA anticipates net bookings of approximately $2.215 billion for the third fiscal quarter and maintains robust financial health with a gross margin of 78.6%.
Meanwhile, Take-Two Interactive’s stock movement suggests investor concern that the issues affecting EA may also influence Take-Two’s performance. As the gaming market continues to evolve, companies like Take-Two will need to monitor these developments closely and adjust their strategies accordingly to maintain growth and investor confidence. These are the recent developments in the gaming industry, indicating a dynamic and ever-evolving landscape.
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