Wall Street analysts are scrambling to downgrade Electronic Arts Inc (NASDAQ: EA) this morning after the company’s management trimmed its outlook for full-year bookings.
The video game firm failed to inspire confidence with a pre-announcement of its third-quarter financials as well – contributing further to the steepest decline in its stock price since the dot-com bubble.
EA stock lost as much as 19% today after blaming two of its most renowned titles: Dragon Age and FC for the weakness.
EA stock is no longer a buy at Raymond James
Electronic Arts now expects a mid-single-digit decline in live services net bookings – much of which it related to its Global Football franchise on Thursday.
For the full year, the Nasdaq-listed firm is now calling for $7.15 billion in net bookings at the top end of its range versus up to $7.8 billion it had guided for earlier.
That made Raymond James analyst Andrew Marok downgrade EA stock to “market perform”.
“Given the lower visibility into near-term trends in the company’s flagship franchise and the doubts it casts on forward execution, we move to the sidelines,” he told clients in a note today.
Note that EA is a dividend stock but the yield is failing to attract investors in the face of deteriorating financials.
BMO shares Andrew Marok’s concerns about EA shares
EA recorded $2.215 billion of net booking for its Q3 on Thursday – significantly below its previous guidance of $2.4 billion to $2.55 billion.
The company attributed the weakness mostly to its fantasy role-playing game “Dragon Age” which had an alarming 50% fewer players in the quarter than its expectations.
“EA is not in the game right now … lack of visibility into EA’s upcoming pipeline gives us a pause as it remains unclear what the catalysts will be to drive growth in FY26E,” BMO analyst Brian Pitz argued in a report today.
Note that Electronic Arts ended its third quarter with $1.88 billion in revenue on $1.11 of adjusted per-share earnings. EA stock is now down some 30% versus its high in late November.
Electronic Arts: a value stock or a value trap?
EA could reduce marketing spend to cut back on costs but analysts are increasingly concerned that near-term risk to forward earnings estimates is very real.
Nonetheless, BMO and Raymond James have $145 and an even higher $170 price target on EA shares still – both of which indicate significant potential upside from current levels.
Additionally, while the Global Football franchise saw weakness in the December quarter, the company’s FC 25 that’s been recently updated with new content and improved gameplay was well-received, as per the management.
Electronic Arts is scheduled to report its full earnings release for the third quarter on February 4th.
Goldman Sachs analysts expect EA stock to be an acquisition target in 2025.
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