On Wednesday, Deutsche Bank (ETR:DBKGn) adjusted its stance on Electronic Arts (NASDAQ:EA) shares, reducing the price target to $150 from the previous $153 while maintaining a Hold rating. The revision follows the company's reported earnings for the fourth fiscal quarter of 2024, which did not meet the bank's expectations.
Electronic Arts' results showed a shortfall in bookings, adjusted operating income (OI), and adjusted earnings per share (EPS), missing the forecasts by 8.6%, 16.0%, and 13.8%, respectively.
The analyst noted that the weaker performance in live services and mobile bookings was somewhat mitigated by stronger sales of full games during the quarter. In response to these results, Deutsche Bank has updated its financial model for Electronic Arts, taking into account the company's financial outlook for the fiscal year 2025 and beyond, as well as a recently announced restructuring plan.
Due to these updates, Deutsche Bank's multi-year forecasts for Electronic Arts have been reduced by 3-6% for bookings and by 2-5% for unlevered free cash flow (UFCF). Despite the downward revision, the new price target of $150 suggests a 15% upside potential from the current levels. This target is based on an 18.9x multiple of the bank's adjusted EPS forecasts for the fiscal year 2025.
The hold rating indicates that Deutsche Bank advises investors to maintain their current position in Electronic Arts stock, without advocating for additional buying or selling at this time. The bank's adjustments reflect the latest financial data and strategic initiatives from Electronic Arts, which investors will likely consider as they assess the company's future prospects.
InvestingPro Insights
In light of Deutsche Bank's recent adjustment to Electronic Arts' (EA) price target, current and potential investors might find additional context from real-time data and InvestingPro Tips valuable. With a market capitalization of $33.48 billion and a P/E ratio standing at 26.79, Electronic Arts appears to be trading at a high earnings multiple. This is further emphasized by an adjusted P/E ratio for the last twelve months as of Q3 2024 at 28.67, indicating a premium valuation in the market.
InvestingPro Tips highlight that EA has a perfect Piotroski Score of 9, suggesting strong financial health, and the company has raised its dividend for 4 consecutive years, reflecting a commitment to returning value to shareholders. Additionally, Electronic Arts holds more cash than debt on its balance sheet, providing financial flexibility and stability. These factors could be particularly reassuring to investors given the company's recent earnings miss.
For those looking to delve deeper into Electronic Arts' financials and future prospects, there are 10 more InvestingPro Tips available at: https://www.investing.com/pro/EA. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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