Electronic Arts Analyst Eyes Upcoming Releases Despite Concerns Over Apex Legends

Benchmark analyst Mike Hickey reiterated Electronic Arts Inc EA with a Buy and a $153 price target.

The analyst holds a cautiously optimistic outlook on EA as they approach the release of their 2Q24 financial results slated for November 1. 

Key releases in the quarter included EA Sports FC 24 and Madden NFL 24. 

The EA Sports FC 24 launch appears strong, delivering an impressive 6.8 million players during its Early Access phase, a 25% increase from last year. 

EA Sports FC 24 has amassed 11.3 million global players since its debut. Concurrently, EA Sports FC Mobile garnered 11.2 million users within ten days post-launch. 

There's also a nearly 20% annual increase in new players for EA Sports FC. However, according to GfK data, the number of copies EA Sports FC sold in its first week is 30% lower than FIFA 23 at launch. 

The decision to remove FIFA 23 from digital stores before the launch of EA Sports FC might dent catalog sales, though this should be accounted for in EA's guidance, and it could also spur increased adoption of the new premium release by eliminating a catalog alternative.

A significant change this quarter was EA's transition from the globally recognized FIFA brand to their newly owned brand, EA Sports FC. 

Hickey retains some confidence in EA Sports FC's growth opportunity considering FIFA's growth momentum but thinks matching last year's record-breaking performance, which included a World Cup engagement boost over the holiday quarter, could prove challenging. 

Hickey remains concerned about growth from Apex Legends, a key Live Service from EA, that has expressed weakness in 1Q24. 

The less-than-exceptional performance in 1Q24 and weaker-than-expected guidance in 2Q24 have elevated 2H24 execution risk, per Hickey. 

EA's FIFA 23 experienced a 50% surge in North American sales, indicating soccer's rising popularity in a region with more growth potential than established European markets. 

Lionel Messi's move to MLS resulted in a significant surge in U.S. subscriptions for MLS's streaming service and Apple TV+. Hickey suspects EA Sports FC 24 will benefit from the growth of soccer viewership in North America.

Hickey projects Q2 revenue of $1.70 billion vs. consensus $1.77 billion and EPS of $1.09 vs. consensus $1.25.

Price Action: EA shares traded higher by 3.39% at $128.81 on the last check Tuesday.