On Thursday, BMO (TSX:BMO) Capital Markets adjusted its stance on Electronic Arts Inc . (NASDAQ:EA), a gaming giant with a $37.33 billion market cap and impressive 78.57% gross profit margin, downgrading the company's stock rating from Outperform to Market Perform and simultaneously lowering the price target from $160.00 to $145.00. According to InvestingPro data, EA's RSI indicates the stock is in oversold territory, potentially presenting an interesting entry point for investors. The revision followed Electronic Arts' preannouncement of its fiscal third-quarter 2025 earnings, which revealed a significant shortfall in Bookings. The company cited two main factors: challenges faced by EA Sports FC25 with tough comparisons from the previous year, and Dragon Age: The Veilguard generating 50% less engagement than anticipated. With the next earnings report due on February 4, 2025, InvestingPro subscribers can access 10+ additional key insights and a comprehensive Pro Research Report to better understand EA's financial position.
In response to these developments, BMO Capital has revised its Bookings estimates for Electronic Arts for fiscal years 2025 and 2026. The estimates have been decreased by approximately 8.5% and 9.5% respectively. The firm expressed that for investor confidence to be restored in Electronic Arts, there would need to be greater visibility into the company's forthcoming release schedule.
Despite the downgrade, the analyst acknowledged the growing strategic market value of Interactive Entertainment assets. Trading at a P/E ratio of 36.47, EA maintains strong financial health with an overall "GOOD" rating from InvestingPro's comprehensive analysis framework. Due to the softer engagement trends observed, BMO Capital found it prudent to adjust its expectations and price target for Electronic Arts shares. The new target reflects a more conservative outlook on the company's near-term performance, taking into account the recent challenges in engaging users with its latest game releases.
In other recent news, Electronic Arts (EA) has revised its fiscal outlook due to a slowdown in the Global Football franchise, projecting a mid-single-digit decline in live services net bookings. The company anticipates net bookings of approximately $2.215 billion for the third fiscal quarter. EA has also reported that Dragon Age engaged around 1.5 million players during the quarter, falling almost 50% short of expectations.
Financial firms have adjusted their outlooks on EA, with Oppenheimer maintaining an Outperform rating on EA's stock, yet reducing the price target to $165. Stifel revised its outlook on EA, reducing the price target to $159 and maintaining a Hold rating due to performance concerns. Meanwhile, Benchmark analysts kept a Buy rating, with a $163 price target.
These recent developments come amid concerns over the decreased player base of Apex Legends and modest sales of Dragon Age. Projections for EA's growth in fiscal year 2026 are more variable than previously estimated due to the uncertain release date of Grand Theft Auto 6. Stifel's forecasts indicate year-over-year growth in the third fiscal quarter of 2025, with non-GAAP EPS of $3.31, a 12% increase year-over-year, on net bookings of $2.456 billion, a 4% rise.
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