On Monday, JPMorgan updated its stance on Electronic Arts (NASDAQ:EA) shares, increasing the video game publisher's price target from $148 to $155, while maintaining a Neutral rating on the company's shares.
The adjustment comes in anticipation of the upcoming release of College Football 25, set to launch on Friday, July 19th, marking the game's return after more than a decade.
Electronic Arts, recognized as the largest pure-play video game publisher, has reached over 700 million gamers with its leading franchises, which include EA SPORTS FC, Madden NFL, Apex Legends, The Sims, and Battlefield.
The industry has experienced slow growth in recent years, prompting companies like EA to streamline spending and concentrate on their most significant intellectual properties.
The firm is optimistic about the performance of EA SPORTS, which has had its most successful year to date. This success was fueled by the rebranding from FIFA to EA SPORTS FC and record bookings for Madden NFL.
Exclusive licenses and the Ultimate Team game mode are seen as robust competitive advantages. The anticipation surrounding College Football 25 is expected to contribute to a better-than-expected performance for EA's financial year 2025 (FY25) outlook.
JPMorgan's revised model for EA projects bookings of $7.6 billion in FY25, surpassing the $7.5 billion midpoint, and an adjusted earnings per share (EPS) of $7.89, which is above the consensus of $7.40. This forecast includes an estimated 5 million units for College Football.
Despite these positive projections, the firm's neutral stance is due to high investor expectations for the game's release, as suggested by strong pre-order data and recent share performance, with EA's stock rising 16% since May 8.
The analyst also expressed concerns over EA's execution across non-sport franchises, noting the uncertain future of Apex Legends and the lukewarm reception to Dragon Age Veilguard's trailer and gameplay. Additionally, EA's FY25 release slate is lighter with eight titles, down from eleven in FY24.
Looking forward, EA has outlined strategies to boost bookings and operational leverage in FY26 and FY27. While JPMorgan is confident in the growth potential of EA SPORTS, there is less certainty about the contribution of non-sport franchises, which are considered necessary for sustaining the company's share price momentum.
Comparatively, the firm shows a preference for shares of Take-Two (NASDAQ:TTWO) Interactive (NASDAQ:TTWO) in light of the Grand Theft Auto VI release in the fall of 2025, which is viewed as a significant event for the industry. JPMorgan's price target for EA is based on an 18x multiple of their FY26 adjusted EPS estimate of $8.50, while noting that Take-Two is currently trading at 21x.
In other recent news, Electronic Arts has seen various analyst revisions and strategic changes. Citi downgraded Electronic Arts' stock from Buy to Neutral, even as it raised the price target to $161 from $148, citing potential risks such as the possible declining performance of "Apex Legends" and competition from upcoming releases like "Grand Theft Auto IV."
On the other hand, Jefferies upgraded the company's stock to a Buy rating, emphasizing Electronic Arts' dominant position in sports and live services across multiple genres. The firm also noted the potential for substantial margin leverage over the next three years with the release of new content.
Stifel increased its price target for Electronic Arts, forecasting potential catalysts that could enhance the company's financial performance. Meanwhile, BMO Capital Markets reduced its price target due to the company's fiscal fourth quarter 2024 and full-year 2024 results not meeting expectations.
Oppenheimer maintained its Outperform rating for Electronic Arts, citing the potential benefits of the company's new pricing strategy for its upcoming sports titles. Similarly, Argus reiterated its Buy rating on Electronic Arts, emphasizing the company's focus on live services and digital content delivery.
These are recent developments, reflecting a variety of anticipations from different analyst firms. Amid these adjustments, Electronic Arts reported a weak revenue outlook, a trend also observed in other gaming companies.
InvestingPro Insights
As Electronic Arts (NASDAQ:EA) gears up for the launch of College Football 25, real-time data from InvestingPro provides a deeper dive into the company's financial health and market performance. With a market capitalization of $38.71 billion and a robust gross profit margin of 77.61% over the last twelve months as of Q1 2023, EA stands as a formidable player in the video game industry. The P/E ratio, a key indicator of market expectations about earnings growth, is currently at 30.95, reflecting a premium relative to the company's near-term earnings growth. However, the PEG ratio, which accounts for earnings growth, is attractively low at 0.49, suggesting potential undervaluation relative to future growth.
InvestingPro Tips highlight that Electronic Arts has a perfect Piotroski Score of 9, indicating strong financial health, and has successfully raised its dividend for four consecutive years, signaling confidence in its financial stability and commitment to shareholder returns. Additionally, the company's liquid assets exceed its short-term obligations, providing a cushion for operational flexibility. For investors seeking comprehensive analysis and additional insights, there are 14 more InvestingPro Tips available, which can be accessed with the coupon code PRONEWS24 for up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription at InvestingPro.
With EA trading near its 52-week high and analysts predicting profitability this year, the company's strategic focus on its flagship franchises and the excitement surrounding new releases like College Football 25 could play a pivotal role in sustaining its share price momentum. As JPMorgan maintains a Neutral rating with an increased price target, these InvestingPro metrics and tips offer investors additional layers of understanding to navigate Electronic Arts' stock performance in the context of the competitive gaming landscape.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.