On Wednesday, Goldman Sachs (NYSE:GS) updated its outlook on Electronic Arts (NASDAQ: NASDAQ:EA) stock, increasing the price target to $150 from the previous $139, while maintaining a Neutral rating.
The adjustment reflects the company's first-quarter fiscal year 2025 earnings, which surpassed both Goldman Sachs' estimates and the guidance provided by EA's management.
Electronic Arts reported robust financial results, with revenues and bookings slightly above expectations. The company's non-GAAP EBIT margins and non-GAAP EPS were also strong. The quarter's success was largely attributed to the performance of sports games, particularly Madden NFL 25, EA FC Online, and Mobile, which exceeded forecasts.
Looking ahead, Goldman Sachs anticipates that expanding the sports franchise with other popular titles like Apex Legends and Battlefield could be crucial for Electronic Arts to achieve sustained revenue growth between fiscal years 2025 to 2027. The firm's medium-term outlook is based on the potential of these franchises to contribute significantly to the company's top-line growth.
Goldman Sachs also highlighted the company's long-term growth drivers, which include Electronic Arts' core game portfolio, mobile strategy, international expansion, potential mergers and acquisitions, and organic investments. These factors, along with the possibility of long-term EBITDA margin expansion, are expected to contribute to the company's growth beyond fiscal year 2025.
The firm has revised its operating estimates for Electronic Arts following the recent earnings report and management commentary. The updated 12-month price target of $150 reflects these adjustments and underscores Goldman Sachs' continued Neutral stance on the stock.
In other recent news, Electronic Arts has been in the spotlight due to a variety of developments. The company's first-quarter financial results for fiscal year 2025 outpaced expectations, largely driven by the strong performance of its key sports franchises. Despite this success, the company's guidance for the fiscal year remained unchanged. Stifel upgraded Electronic Arts' stock price target to $167, maintaining a Buy rating, while Roth/MKM increased the price target to $152, keeping a Neutral rating.
In addition to these financial developments, Electronic Arts is among several major video game publishers expected to navigate an ongoing strike by voice actors and motion-capture artists with minimal impact, according to industry analysts. The strike was initiated by members of the SAG-AFTRA union, seeking protections against the use of artificial intelligence.
Furthermore, Electronic Arts is anticipated to rebound with the upcoming release of NCAA Football 25, a key factor in Roth/MKM's revised financial model and estimates for the company. These are some of the recent developments that have shaped the current landscape for Electronic Arts.
InvestingPro Insights
Electronic Arts (NASDAQ: EA) has caught the attention of analysts and investors alike with its recent financial performance, and the updated outlook from Goldman Sachs further underscores the company's potential. In line with this, InvestingPro provides additional insights that could be valuable for investors considering EA's stock. According to InvestingPro data, Electronic Arts boasts a market capitalization of $39.63 billion, and while its P/E ratio stands at 31.64, it is trading at a lower forward P/E ratio of 28.91, suggesting near-term earnings growth. The company's revenue for the last twelve months as of Q4 2024 is reported at $7.562 billion, with a gross profit margin impressively high at 77.61%.
InvestingPro Tips highlight that Electronic Arts maintains a strong financial position, with a perfect Piotroski Score of 9 indicating a healthy financial state. The company also holds more cash than debt on its balance sheet, a reassuring sign for investors concerned about financial stability. Furthermore, EA has been consistent in returning value to shareholders, raising its dividend for 4 consecutive years. For those seeking more in-depth analysis, InvestingPro offers additional tips on Electronic Arts, which can be accessed at https://www.investing.com/pro/EA. Use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, and discover the full range of 15 InvestingPro Tips that could help guide your investment decisions.
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