Market Overview

Low 'Star Wars' Sales Drive Electronic Arts Downgrade, Says Morgan Stanley

Share:
Low 'Star Wars' Sales Drive Electronic Arts Downgrade, Says Morgan Stanley
Related EA
Citigroup, EA, Intel, United Rentals: 'Fast Money' Picks For November 7
The Age Of Virtual Athletes: Esports On Campus
A Brave New Activision Blizzard (Seeking Alpha)

Expectations for Electronic Arts Inc. (NASDAQ: EA)'s latest "Star Wars" game were high, and recent disappointing third party data prompted one Wall Street analyst to part ways with his bullish stance on the stock.

The Analyst

Morgan Stanley's Brian Nowak downgraded EA from Overweight to Equal-Weight with a price target lowered from $126 to $120.

The Thesis

Sales of EA's "Star Wars Battlefront 2" are off to a poor start, according to third party data from NPD, Nowak said in the downgrade Morgan Stanley revised its sales forecast of 13 million unit sales in the fiscal third quarter downward to 10 million units.

In addition, EA delayed the rollout of "Star Wars Battlefront 2" microtransactions, Nowak said. It's unlikely they'll appear in the game until the fiscal fourth quarter, the analyst said. But when it the feature does appear in the game, it will be "heavily scrutinized" by the gaming community due to prior backlashes — even if the company takes a conservative approach with its digital monetization plans, he said. 

Given these two negative updates, the analyst's fiscal 2018 EPS estimate was lowered by 3 percent to 13 cents, and Nowak said this will flow through to fiscal 2019 as well.

"Given [that] we struggle to find further material catalysts or sources of upside, we move to the sidelines with an EW rating." 

Price Action

Shares of Electronic Arts were trading lower by nearly 2 percent ahead of Friday's market open.

Related Links:

Electronic Arts Upgraded After 'Star Wars' Backlash: Here's Why

What Is Melvin Capital, And What Does It Want With Electronic Arts?

Photo courtesy of Electronic Arts. 

Latest Ratings for EA

DateFirmActionFromTo
Nov 2018BMO CapitalMaintainsOutperformOutperform
Nov 2018ArgusMaintainsBuyBuy
Oct 2018Morgan StanleyMaintainsEqual-WeightEqual-Weight

View More Analyst Ratings for EA
View the Latest Analyst Ratings

Posted-In: Brian Nowak Digital Video Games Morgan Stanley NPDAnalyst Color Downgrades Price Target Analyst Ratings Best of Benzinga

 

Related Articles (EA)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
LXFTKeyBancDowngrades0.0
CPAImperial CapitalDowngrades68.0
PRMWImperial CapitalInitiates Coverage On18.0
TGTKeyBancInitiates Coverage On110.0
QCOMMorgan StanleyUpgrades0.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

Benzinga's Top Upgrades, Downgrades For January 12, 2018

The Market In 5 Minutes: Blockchain Enthusiasm, Facebook's News Feed, Trump's Potty Mouth