By The Ratings Game: Electronic Arts stock logs worst decline of pandemic as ‘rare’ disappointment resets expectations
Electronic Arts Inc. shares were on track for their worst decline of the COVID-19 pandemic Wednesday, as Wall Street reset its expectations for the videogame publisher amid a forecast miss and game delays.
EA
EA,
-10.26%
shares fell as much as 14% to an intraday low of $112.80, and were last down about 12%, on track for their worst one-day drop since Feb. 6, 2019, when they finished down 13.3%, according to FactSet data. The stock largely avoided a widespread decline in videogame and tech stocks last year, falling 7.4% amid a near 20% drop on the S&P 500 index
SPX,
+1.08%,
while Take-Two Interactive Software Inc.
TTWO,
-0.91%
shares dropped 41.4% in and shares of Activision Blizzard Inc.
ATVI,
+0.18%
— buoyed by the yet-to-be-closed and contentious acquisition by Microsoft Corp.
MSFT,
+2.28%
— rose 15.1%.
The videogame publisher fell short of Wall Street expectations for its sales and outlook with a Tuesday report, while announcing mobile versions of two popular games would get shelved and the company’s “Star Wars Jedi: Survivor” release would be delayed.
Cowen analyst Doug Creutz, who has an outperform rating and lowered his target price to $136 from $158, said the disappointment was “across the board.”
The Cowen analyst said the light outlook from the company “implies” that the company’s bookings guidance for fiscal 2024 would have been light if it hadn’t received a bump from the Star Wars delay.
“Hopefully this is just a case of management wanting to set the bar very low after two consecutive guidedowns,” Creutz said.
Read: Electronic Arts stock plunges more than 10% as mobile versions of popular games shelved amid cuts
Jefferies analyst Andrew Uerkwitz, who has a buy rating and lowered his price target to $147 from $159, said “no one is immune” to “game delays, increasing game complexity, uncertain consumer behavior,” and a macro that has been “wrecking havoc on the videogame industry.”
Calling the miss “rare,” Uerkwitz said the delays and “lackluster” outlook push what he had liked about the stock for the second half of 2023 into the first half of 2024.
Wells Fargo analyst Brian Fitzgerald, who has an equal-weight rating and lowered his price target to $120 from $150, said he was “encouraged” by management’s cost discipline and remained optimistic about the company’s long-term prospects.
“The F4Q and full-year outlooks notably reflect the decision to push Star Wars Jedi: Survivor to April,” Fitzgerald said.
Of the 34 analysts who cover EA, 22 have buy-grade ratings and 12 have hold ratings. Of those, at least 15 dropped their price target after the report, resulting in an average price target of $136.18, down from a previous $146.70, according to FactSet data.
