The Ratings Game: Electronic Arts stock logs worst decline of pandemic as ‘rare’ disappointment resets expectations

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Electronic Arts Inc. shares logged their worst decline since the start of the pandemic Wednesday, as Wall Street reset its expectations for the videogame publisher amid a forecast miss and delays in game releases.

Electronic Arts

shares, which fell as much as 14% to an intraday low of $112.80, finished down 9.3% at $116.76, for their worst one-day percentage drop since Feb. 6, 2019, when they closed down 13.3%, according to FactSet data. The stock largely avoided being caught up in the widespread decline in videogame and tech stocks last year, falling 7.4% as the S&P 500

dropped nearly 20%. Take-Two Interactive Software Inc.

shares dropped 41.4%, while shares of Activision Blizzard Inc.

— buoyed by the contentious, yet-to-be-closed acquisition by Microsoft Corp.

— rose 15.1%.

The broader market finished Wednesday higher, with the S&P 500

up 1.1%, and the Nasdaq

up 2%.

In a Tuesday earnings report, Electronic Arts fell short of Wall Street expectations for its sales and outlook and announced that mobile versions of two popular games would be shelved and the release of “Star Wars Jedi: Survivor” would be delayed.

Cowen analyst Doug Creutz, who has an outperform rating and lowered his target price to $136 from $158, said the disappointment was “across the board.”

Creutz said the outlook from the company implies that the company’s bookings guidance for fiscal 2024 would have been light if it hadn’t received a bump from the “Star Wars” delay.

“Hopefully this is just a case of management wanting to set the bar very low after two consecutive guidedowns,” Creutz said.

Read: Electronic Arts stock plunges more than 10% as mobile versions of popular games shelved amid cuts

Jefferies analyst Andrew Uerkwitz, who has a buy rating and lowered his price target to $147 from $159, said “no one is immune” to “game delays, increasing game complexity, uncertain consumer behavior” and a macro that has been “wreaking havoc on the videogame industry.”

Calling the miss “rare,” Uerkwitz said the delays and “lackluster” outlook push what he had liked about the stock for the second half of 2023 into the first half of 2024.

Wells Fargo analyst Brian Fitzgerald, who has an equal-weight rating and lowered his price target to $120 from $150, said he was “encouraged” by management’s cost discipline and remained optimistic about the company’s long-term prospects.

“The [fourth-quarter] and full-year outlooks notably reflect the decision to push ‘Star Wars Jedi: Survivor’ to April,” Fitzgerald said.

Of the 34 analysts who cover Electronic Arts, 22 have buy-grade ratings and 12 have hold ratings. Of those, at least 15 dropped their price target after the report, resulting in an average price target of $136.18, down from a previous $146.70, according to FactSet data.

Read: As gamers wait for ‘Grand Theft Auto VI,’ Take-Two likely has ‘major announcements right around the corner,’ analyst says