Electronic Arts Inc. Stock Update

Shares of Electronic Arts Inc. (NASDAQ: EA) traded lower in pre-market on Wednesday after Stifel analysts downgraded the stock from “buy” to “hold.”

Reasons for Downgrade

The downgrade stems from concerns over valuation and uncertainties regarding major upcoming game launches. Despite maintaining a positive outlook on EA's long-term fundamentals, analysts noted limited short-term upside for the stock, which has already achieved a 15% year-to-date return in 2024, including dividends.

Currently, EA's valuation sits at 19.5 times next-twelve-month earnings, nearing levels the analysts view as less favorable. They identified risks associated with the anticipated release of the next Battlefield game, a crucial title for EA in FY2026.

Acknowledgment of Competition

While Respawn CEO Vince Zampella has a track record of successful titles like Apex Legends, the analysts highlighted challenges for the franchise and the competitive market, particularly with the upcoming launch of Grand Theft Auto VI.

The downgrade also considered the strong initial sales of EA's College Football 25 release, which benefited from pent-up demand after an 11-year break. However, analysts believe this performance is unlikely to continue with future installments, complicating revenue comparisons for FY2026.

Adjusted Forecasts

Stifel slightly lowered its net bookings forecasts for EA, reducing expectations for games including Dragon Age: The Veilguard and the College Football franchise.

The new target price for the stock is set at $167, a decline from previous estimates, reflecting the Hold recommendation.

Although EA boasts a diverse gaming portfolio with franchises like Madden NFL and EA Sports FC, the analysts concluded that current valuations and market conditions necessitate a more cautious approach in the near term.