Electronic Arts
Despite buyout speculation, EA's stock outlook still hinges on the performance of its major franchises. Madden, EA Sports Football Club, and Battlefield are integral to its long-term strategy.
Goldman Sachs analyst Eric Sheridan maintained a Neutral rating on EA with a price forecast of $170.
A potential take-private deal for Electronic Arts gives it a value that's 17 times its fiscal 2027 adjusted EBITDA estimate. Sheridan compared that multiple with the 17 times multiple applied to Activision Blizzard when Microsoft acquired it.
Sheridan includes an M&A scenario using a 19 times multiple on his next twelve months plus one-year estimate. This implies an enterprise value of $58.2 billion. The analyst assigns a 15% weight to this M&A prong within his 12-month price forecast for EA.
Despite the media reports, Sheridan made no changes to his operating estimates, valuation work, or assumptions about the likelihood of a deal.
He emphasized that EA's medium- to long-term fundamentals will continue to depend on the performance of key franchises over the next 6-12 months, including American football, EA FC/FC Mobile, and the launch of Battlefield 6.
Over a longer horizon, he pointed to management's Fall 2024 Investor Day as the main guidepost for strategy and growth expectations.
Sheridan's valuation blends fundamental analysis (85% weight) and M&A scenarios (15% weight).
Sheridan isn't the only analyst examining EA this week. Wedbush analyst Alicia Reese downgraded the company from Outperform to Neutral. She also lowered her price target from $210 to $200.
The upcoming release of Battlefield 6 is driving the company's shares higher in recent months, Reese said in the downgrade note.
EA Price Action: Electronic Arts shares were up 4.81% at $202.63 at the time of publication on Monday.
