Stifel analysts said in a note Friday that Electronic Arts (NASDAQ:EA) is “safer near-term, and more interesting longer-term.” The analysts maintained a Buy rating and a $144 price target on the stock.
The firm continues to favor EA in the interim due to the company’s net bookings mix, which they believe positions it to report in-line FY3Q23 results — which will be released January 31st aftermarket — while also limiting material downside risk.
“Taking an intermediate/longer-term perspective, which is a centerpiece of this analysis, we’re cautiously optimistic on the prospects for EA’s new soccer game, have greater confidence in its FY2025-’26 slate relative to other third-party console publishers, and like the company’s cash flow profile,” wrote the analysts.
Last year it was announced that EA’s FIFA game, one of the most popular video game franchises, will be renamed EA Sports FC EA failed to reach a new licensing agreement with the world soccer governing body. The first EA Sports FC game will be released later this year.
“While the game will be lapping a difficult World Cup comp, and any savings from the absence of royalties paid to FIFA will likely be re-invested back into the biz for brand-building purposes, we’re cautiously optimistic on the longer-term prospects for this new endeavor. Our ‘soccer model’ embeds a net bookings increase of LSD%s for FY2024, which should then re-accelerate (MSD%s range) thereafter, with EA Sports FC serving as a key contributor to growth,” the analysts added.
They went on to state that the firm finds EA’s valuations to be reasonable relative to its historical averages, peers, and financial profile.