On Wednesday, Roth/MKM adjusted its outlook on Electronic Arts (NASDAQ:EA) shares, reducing the price target from $140.00 to $135.00. The firm has kept a Neutral rating.
The adjustment comes amid expectations that Electronic Arts should be able to maintain its early read for fiscal year 2025 earnings per share (EPS) outlook, projecting mid-single digit to high-single digit growth, which is believed to be supported by cost reduction measures.
The analyst expressed concerns about whether Electronic Arts will meet its low-single digit bookings expectation. The company's fiscal year 2025 release schedule is anticipated to be modest, and there are uncertainties regarding the performance of Live Services. These services are ongoing revenue streams from games that are continuously updated with new content and features.
A key challenge identified by Roth/MKM for Electronic Arts is the lack of clarity regarding the company's development pipeline. This refers to the upcoming games and content that the company plans to release, which is a critical factor for investors and analysts when assessing the company's future growth potential.
The new price target of $135.00 is based on approximately 18 times Roth/MKM's estimated EPS for Electronic Arts in fiscal year 2025. This price target suggests a valuation based on the firm's earnings forecasts, which take into account both the opportunities and risks that may affect the company's financial performance in the coming years.
InvestingPro Insights
InvestingPro data and tips offer a deeper dive into Electronic Arts' (NASDAQ:EA) financial health and market position. With a market capitalization of $33.91 billion and a price-to-earnings (P/E) ratio of 31.93, EA is trading at a premium relative to its earnings. The company's P/E ratio has adjusted slightly better in the last twelve months as of Q3 2024, standing at 29.03. Despite a modest revenue growth of 3.8% in the same period, the company's gross profit margin remains robust at 76.48%, reflecting its ability to maintain profitability.
Electronic Arts also shows a commitment to shareholder returns, having raised its dividend for 4 consecutive years. The current dividend yield is 0.6%, with the last ex-date recorded on February 27, 2024. This, coupled with the fact that EA holds more cash than debt on its balance sheet, provides a measure of financial stability and flexibility. Furthermore, InvestingPro Tips reveal that EA is expected to be profitable this year and has been profitable over the last twelve months.
For investors looking for additional insights, there are more InvestingPro Tips available, including the company's liquidity position and analysts' predictions. To explore these further, visit https://www.investing.com/pro/EA and remember to use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are 11 additional InvestingPro Tips that could provide valuable guidance for your investment decisions.
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