EA stock upgrade supported by rebranding and new releases

EA stock upgrade supported by rebranding and new releases

Jefferies on Thursday took over coverage of Electronic Arts (NASDAQ:), upgrading the gaming giant’s stock to a Buy rating and raising its price target to $165 from $160. The company highlighted EA’s dominant position in esports and live services as a key driver for the company’s growth prospects.

The analyst cited the FIFA World Cup-related rebranding and the addition of College Football as factors expected to drive mid-single-digit percentage growth in EA’s sports segment.

The company’s extensive new game pipeline, which includes more major titles than those of Take-Two (NASDAQ:) Interactive Software, Inc., was considered a positive development, even if it didn’t directly compete with the scale of Grand Theft Auto VI.

Electronic Arts is expected to generate significant margin leverage of approximately 350 basis points as it releases new content over the next three years. That leverage, along with an expected release slate, margin expansion and industry-leading cash flow, supports the $165 price target, according to Jefferies.

This target is based on 19 times the company’s FY2 forecast of $8.67 earnings per share, and given EA’s upcoming announcements and financial outlook, a range of 15 to 20 times over a three-year period seems justified.

Discussions about EA’s future projects are expected to come into focus in the second half of the year, marking a period of heightened interest in the company’s future offerings and financial performance.

In other recent news, Electronic Arts has seen a number of financial revisions and strategies. Stifel recently raised its price target on the video game company to $163 and maintained a Buy rating. The adjustment reflects the firm’s expectation of upcoming catalysts that could improve the company’s financial performance.

Meanwhile, BMO Capital Markets lowered its price target despite maintaining Electronic Arts’ Outperform rating after fourth-quarter fiscal 2024 and full-year 2024 results fell short of expectations.

Meanwhile, Oppenheimer maintained its Outperform rating for Electronic Arts, citing the potential benefits of the company’s new pricing strategy for its upcoming sports games. Meanwhile, Argus reiterated its Buy rating for Electronic Arts, emphasizing the company’s focus on live services and digital content distribution.

These are the latest developments that highlight the differing expectations of different analyst firms. Among these adjustments, Electronic Arts reported a weak revenue outlook, a trend that has also been seen at other gaming companies such as Roblox. Investors will be watching closely to see how these developments play out as the gaming industry grapples with its current challenges.

InvestingPro Insights

Analyzing the latest financial data from InvestingPro, Electronic Arts (NASDAQ:EA) presents a solid financial outlook. With a market cap of $38.29 billion and a forward P/E ratio of 27.93 for Q4 2024, EA appears to be trading at a favorable valuation based on near-term earnings growth. The company’s low PEG ratio of 0.47 for the same period suggests that the stock price is potentially undervalued given its expected earnings growth rates.

InvestingPro Tips highlights EA’s strong financial health, citing the company’s perfect Piotroski Score of 9 and its ability to hold more cash than debt on its balance sheet. Additionally, EA’s commitment to returning value to shareholders is evident in the fact that it has increased its dividend for four consecutive years. These factors, combined with the company’s low price volatility and its ability for cash flows to comfortably cover interest payments, provide investors with a sense of stability and reliability.

For readers interested in deeper analysis, InvestingPro offers additional tips on EA’s financial health and stock performance, which you can explore in more detail by visiting . Use the coupon code to access these insights and more PROHABERLER24 to get up to 10% off an annual Pro and an annual or bi-annual Pro+ subscription. In total, there are 13 additional InvestingPro Tips that can help investors make informed decisions about their investments in Electronic Arts.

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