With just days before Electronic Arts (NASDAQ:EA) releases College Football, a video game that should propel EA’s FY25 bookings to the company’s $7.7B target, Citigroup has downgraded the stock to Neutral from Buy amid concerns about potential crowding out from Grand Theft Auto IV, recent weakness with Apex Legends, and the underlying macro risk from diminished consumer spending.
“We’re more confident that EA can hit its bookings guide for FY25 as College Football can offset the tough bookings comp from Star Wars Jedi: Survivor,” Citigroup’s Jason Bazinet said in Monday’s research note, but the “point of potential weakness” from Apex Legends coupled with the other “exogenous risks” drives Citigroup to the sidelines.
Bazinet’s Neutral rating also reflects EA’s recent performance in the wake of disappointing FY25 guidance. In May, the company reported disappointing FQ4 booking and EPS and provided FQ1 and FY25 bookings guidance that was below Street expectations, sending shares lower. Still, the stock recovered and appreciated by 17% since FQ4 results were announced as investors were already bracing for soft guidance and were encouraged with the robust pipeline to match Star Wars Jedi: Survivor.
And then came the announcement that College Football would come with an Ultimate Team component, implying that the title would generate additional revenue beyond unit sales.
So, to compensate for the higher stock price, Bazinet raised his price target for EA by 9% to $161, a 10% upside to Friday’s close, but is moving to the sidelines given limited upside left to the stock price and the potential headwinds.
Analysts are mixed on Electronic Arts (EA) with Seeking Alpha analysts rating the stock as a Hold while Wall Street views it as a Buy. Seeking Alpha’s Quant rating views EA as a Hold.