Star Wars Jedi Survivor and Strong Product Cycle Drive Optimism for Electronic Arts Amidst Possible Industry Consolidation: Analyst

Benchmark analyst Mike Hickey maintained Electronic Arts Inc EA with a Buy and raised the price target from $150 to $159.

The analyst predicts a promising opportunity for medium-term growth for EA, springboarding off the expected tepid growth in FY24. 

He expects minimal risks related to execution during this period, while business momentum in the near term should push F1Q24 beyond consensus predictions. 

The most substantial incremental catalyst in the quarter and fiscal year is Star Wars Jedi Survivor, which has surpassed Hickey's initial expectations and should drive growth upside in the quarter. 

Given the exceptional performance of FIFA 23 during the last fiscal year, primarily as it benefited from the World Cup's engagement during the holiday quarter, the analyst tempered his optimism for a meaningful upside on EA's FY24 growth guidance.

If Microsoft Corp's MSFT acquisition of Activision Blizzard, Inc  ATVI is successful, it will catalyze more consolidation within the interactive entertainment sector. In such a scenario, EA stands out as a prime candidate for potential acquisition due to its strong market position and influential portfolio of games. 

F1Q24 – Guidance: EA guided net bookings to $1.500 billion - $1.600 billion, midpoint: $1.550 billion (consensus: $1.572 billion). Adjusted EPS will likely be $0.85 - $1.05, midpoint: $0.95 (consensus: $1.00). 

1Q Catalysts include STAR WARS Jedi Survivor, PGA Tour, Super Mega Baseball 4, F1, and Lord of the Rings: Heroes of Middle Earth. 

FY24 – Guidance: Net bookings to $7.300 billion - $7.700 billion, midpoint: $7.500 billion (consensus: $7.603 billion). Adjusted EPS will likely be $6.35 - $6.95, midpoint: $6.65 (consensus: $6.87). 

Catalysts subsequent F1Q24 release slate include Immortals of Aveum (F2Q24), EA Sports FC (F2Q24), Madden 24 (F2Q24), NHL 24 (F3Q24), and an unannounced EA Sports title UFC and Racing title NFS WRC, PC2). 

Emerging Product Cycle: Battlefield, Star Wars (FPS & RTS), Dragon Age Dreadwolf, College Football, UFC/Boxing, Skate, Need for Speed, Mass Effect, and The Sims 5. 

Price Action: EA shares traded higher by 1.39% at $139.68 on the last check Tuesday.