EA shares down pre-market as Stifel downgrades to 'hold' on valuation concerns

Investing.com -- Shares of Electronic Arts Inc . (NASDAQ:EA ) traded lower on Wednesday in pre-market trading following a downgrade from Stifel analysts, who revised their rating on the stock to “hold” from “buy.” 

The downgrade reflects concerns over valuation and uncertainties surrounding key upcoming game launches.

Analysts at Stifel maintained their positive view on EA's long-term fundamentals but noted limited short-term upside for the stock, which has already delivered a strong 15% year-to-date return in 2024, including dividends.

EA's valuation—currently at 19.5 times next-twelve-month earnings—has approached levels that Stifel deems less compelling, as per Stifel. 

The analysts further flagged potential risks tied to the highly anticipated release of the next Battlefield game, a critical title for EA in FY2026. 

Despite leadership from Respawn CEO Vince Zampella, known for successful projects like Apex Legends, Stifel underscored the franchise's recent struggles and the competitive landscape, including the imminent launch of Grand Theft Auto VI.

The downgrade also factored in EA's College Football 25 release, which saw strong initial sales due to pent-up demand after an 11-year hiatus. 

However, analysts cautioned that this performance is unlikely to be replicated with future iterations, complicating revenue comparisons for FY2026.

Stifel adjusted its net bookings forecasts for EA slightly downward, citing reduced expectations for titles such as Dragon Age: The Veilguard and the College Football franchise. 

The new target price for the stock was set at $167, down from prior expectations, aligning with the Hold recommendation.

While EA’s broad gaming portfolio, including popular franchises like Madden NFL and EA Sports FC, remains a strength, the analysts concluded that current valuations and market dynamics warrant a more cautious stance in the near term.

Source: Investing.com