Electronic Arts: Stifel downgrades to Hold on less upbeat outlook
Investing.com– Stifel downgraded its rating on Electronic Arts Inc (NASDAQ:EA), stating that while the stock did mark strong returns in 2024, it was likely to see limited upside in the coming months in the face of increased competition and a limited release slate.
Stifel cut EA to Hold from Buy with a target price of $167.0- a nearly 8% increase from EA’s close on Tuesday.
The brokerage said that while EA had returned nearly 15% year-to-date in 2024, the stock did not appear to have compelling potential for more gains in the interim.
“While still positive on the intermediate/longer-term fundamental outlook for EA, following a successful CY2024, we see limited upside for the shares in the interim,” Stifel analysts wrote in a note.
They noted a lack of conviction towards the next Battlefield game, which is “arguably the most important launch of FY 2026 for EA.”
While the development team for the game, led by Respawn CEO Vince Zampella- does inspire some confidence in the game, Stifel noted that Battlefield as a franchise has “much to prove” after disappointing with its last two entries.
The game will likely face increased competition from Take-Two Interactive ‘s (NASDAQ:TTWO) GTA VI, which is set for a 2025 launch, and will also compete with other competitive shooter stalwarts including Call of Duty and Fortnite.
Stifel said EA’s recent big-ticket launch- Dragon Age: Veilguard- fell short of original expectations, with unit assumptions now forecast at 4 million and 2 million for fiscal 2025 and 2026, respectively, versus prior estimates of 5.4 million and 2.7 million.
The brokerage also raised doubts over whether College Football 25’s success could be replicated in fiscal 2026. While Stifel did say it was positive on the longer-term prospects for EA’s American football franchises, it noted that stellar sales of College Football 25 were boosted by pent-up demand from a 11-year hiatus, and that this level of sales was likely to be unsustainable.