Wall Street analysts have been scrambling today to lower their ratings for Electronic Arts Inc. (NASDAQ: EA), after its management reduced the outlook of full-year sales.
A pre-announcement on the video game company’s third quarter financials also failed to instill confidence, contributing to the steepest drop in the stock price of the firm since the dotcom bubble.
EA’s stock dropped as much as 19% today, blaming its two most popular titles, Dragon Age and FC.
Raymond James no longer recommends EA as a stock to buy
Electronic Arts expects to see a decline of live service net bookings in the single digits. This is largely due to Global Football, which was released on Thursday.
The Nasdaq listed company is now aiming for $7.15billion in net bookings for the entire year. Earlier, it was guiding for up to $7.8billion.
Andrew Marok, Raymond James’ analyst at the time, downgraded EA to “market Perform”.
In a client note, he said: “Given that there is less visibility in near-term trends for the flagship franchise of the company and it creates doubts about forward execution we are moving to the sidelines.”
EA has a high dividend yield, but investors are not attracted to it because of the deteriorated financial position.
BMO shares Andrew Marok’s concern about EA Shares
EA reported $2.215 billion in net bookings for Q3 2005 on Thursday, a significant drop from its original guidance of $2.4 to $2.55 Billion.
It attributed this to the fact that it had 50% less players than expected in its fantasy RPG “Dragon Age”.
In a recent report, BMO analyst Brian Pitz stated that “EA has not entered the market yet… the lack of visibility in EA’s future pipeline causes us to pause because it is unclear which catalysts are going to be driving growth in FY26E.”
Electronic Arts’ third-quarter revenue was $1.88billion, with adjusted earnings per share of $1.11. EA’s stock has fallen by about 30% since its peak in November.
Electronic Arts – a stock with value or a trap for value?
Analysts are concerned about the near-term impact of EA’s marketing budget on earnings.
BMO has a price target of $145, while Raymond James is even more ambitious at $170. Both indicate a significant upside potential from the current level.
Management also stated that while Global Football saw a decline in December, FC 25, which has recently been updated with improved content, was very well received.
Electronic Arts will report full results for its third quarter earnings on 4 February thTHE STALL
Goldman Sachs expects EA to become a target for acquisitions in 2025.
The ICD published this post EA Stock headed for worst drop as revised guidance confuses analysts
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