EA: A Pending Buyout And New Releases Will Shape The Outlook

AnalystConsensusTarget

Not Invested

Based on Analyst Price Targets

Published

06 Aug 24

Updated

04 Feb 26

Views

277

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AnalystConsensusTarget's Fair Value

n/a

55.5%

-1.9%

55.5%

-1.9%

You can edit this narrative until Feb 5 2:10 PM. Then, changes will post as Updates.

Author's Valuation

US$204.162.0% undervalued

AnalystConsensusTarget Fair Value

Narrative

Updates19

Last Update 04 Feb 26

Fair value Increased 0.89%

EA: Take Private Deal And Player Engagement Trends Will Shape Returns

Analysts have raised their fair value estimate for Electronic Arts by about $2 per share. The change reflects updated assumptions that include slightly higher revenue growth, modestly stronger profit margins, a lower discount rate, and a somewhat reduced future P/E multiple.

What's in the News

Kaskela Law LLC filed a shareholder class action lawsuit challenging the proposed buyout of Electronic Arts at US$210 per share, focusing on valuation, the negotiation process, potential conflicts of interest, and the adequacy of disclosures to investors (Key Developments).
Electronic Arts scheduled a special shareholder meeting for December 22, 2025, to vote on the merger agreement that would take the company private, executive compensation tied to the deal, and any adjournment needed to solicit additional proxies (Key Developments).
Goldman Sachs is expected to earn a US$110m advisory fee for serving as the sole financial adviser to Electronic Arts on the proposed US$55b take private transaction (Financial Times).
Battlefield 6, EA Sports FC 26, and Pokemon Legends: Z A held the top three positions in European weekly unit sales, with Battlefield 6 remaining in first place despite a 24% week on week sales decline and EA Sports FC 26 seeing an 11% decline (The Game Business).
Forbes compared player retention in Nexon owned ARC Raiders on Steam with Battlefield 6, citing a very large retention figure for ARC Raiders and contrasting it with Battlefield 6’s concurrent player trend, highlighting competition among live service shooters (Forbes).

Valuation Changes

Fair Value Estimate increased slightly from US$202.36 to US$204.16 per share, reflecting a modest uplift in the analyst model.
Discount Rate reduced slightly from 9.01% to 8.94%, which increases the present value assigned to future cash flows.
Revenue Growth assumption raised from 6.18% to 7.70%, indicating a somewhat stronger top line outlook in the updated model.
Net Profit Margin assumption edged up from 18.69% to 18.97%, pointing to a modest improvement in expected profitability.
Future P/E trimmed from 35.03x to 33.31x, implying a slightly more conservative multiple applied to projected earnings.

Strategic focus on live services and new games, leveraging events like the World Cup, aims to boost revenue and player engagement.
AI integration and disciplined cost management are expected to enhance efficiency, profitability, and earnings growth.
Revenue challenges stem from underperforming IPs, shifting portfolio focus, and macroeconomic pressures impacting consumer spending and live services growth.

Catalysts

About Electronic Arts

Develops, markets, publishes, and delivers games, content, and services for game consoles, PCs, mobile phones, and tablets worldwide.What are the underlying business or industry changes driving this perspective?

EA's strategic focus on expanding live services and new game launches, such as Skate and Battlefield, is expected to drive revenue growth and foster player engagement.
The relaunch of American Football and continued success of FC Mobile, particularly in fast-growing markets, are expected to significantly boost net bookings and player base.
EA plans to leverage the 2026 World Cup as a major acquisition opportunity for its global football franchise, likely increasing net bookings and player engagement across platforms.
Integration of AI in game development for deeper, more personalized experiences is expected to enhance operating efficiencies and potentially improve net margins.
Ongoing share repurchase programs and disciplined operating expense management signal potential for earnings and margin expansion, supporting EPS growth.

Electronic Arts Earnings and Revenue Growth

Electronic Arts Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Electronic Arts's revenue will grow by 5.1% annually over the next 3 years.
Analysts assume that profit margins will increase from 13.9% today to 17.9% in 3 years time.
Analysts expect earnings to reach $1.6 billion (and earnings per share of $6.55) by about September 2028, up from $1.0 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $1.8 billion in earnings, and the most bearish expecting $1.3 billion.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 31.8x on those 2028 earnings, down from 39.9x today. This future PE is lower than the current PE for the US Entertainment industry at 39.3x.
Analysts expect the number of shares outstanding to decline by 4.6% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 9.13%, as per the Simply Wall St company report.

Electronic Arts Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The decline in net bookings for FY '25, particularly influenced by factors like softness in Apex Legends and the negative impact of slate timing, reflects potential vulnerabilities in EA's revenue stream from underperforming IPs.
The projected 40% year-over-year decline in Apex Legends net bookings could significantly impact EA's live services revenue, which forms a substantial part of overall earnings.
Concerns over macroeconomic conditions and their possible effects on consumer spending, particularly in discretionary categories such as gaming, pose risks to EA's future revenue growth and profitability.
The ongoing structural transition in EA's portfolio, shifting away from traditional full-game sales towards live services and blockbuster storytelling also indicates potential challenges in maintaining revenue consistency during this period.
Despite attempts to rejuvenate the FC franchise, challenges related to player migration from older titles to new releases highlight a risk to EA's future growth in terms of player engagement and monetization.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $175.533 for Electronic Arts based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $210.0, and the most bearish reporting a price target of just $148.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $8.7 billion, earnings will come to $1.6 billion, and it would be trading on a PE ratio of 31.8x, assuming you use a discount rate of 9.1%.
Given the current share price of $166.04, the analyst price target of $175.53 is 5.4% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.