According to the news report by MarketWatch, Electronic Arts Inc.’s shares fell by 2.7% in pre-market trading on Thursday after Timothy O’Shea, the Jeffries analyst who is following the company, downgraded its stocks from a “buy” rating to a “hold” rating. O’Shea also reduced his share price target for EA from $139 per share to $95 per share.
EA’s shares have fallen by 21% in the last 12 months, as compared to the S&P 500 Index, which has fallen 6.7%.
O’Shea stated that the gaming company’s main profit maker Ultimate Team was reaching a plateau and that in could actually start to decline. The analyst also expressed concern about the new games that are due to be released in 2019 as they are unproven.
He said that Anthem, the game that is due to be launched on February 22 this year, looks to be too technically ambitious and possibly rushed. The game has already slipped up in the past.
Additionally, next to nothing is known about the company’s major holiday game for the year – Star Wars Jedi Fallen Order. This game is aiming to fill the gap that was left when the company cancelled Star Wars Battlefront 3.
While the upcoming Titanfall 3 seemed to show promise, its predecessors had had mediocre sales. This was due to a limited availability of platform as well as poor launch window.
O’Shea said that it was in the non-sports-based games section that Electronic Arts needed to prove itself. Several titles in this genre were not critically well-received. The concern is that the company may have lost its creative edge.
CNBC gave further news about this story. According to the publication, O’Shea also said that the company had a lot that it needed to prove. The latest version of EA’s best-selling game franchise FIFA has showed slowing sales. Additionally, other games such as Need for Speed received mixed reviews.
So far in the last few years, the company was riding on the success of its blockbuster game FIFA Ultimate Team. The FIFA series has become one of the most popular sports gaming franchises in video game history.
Through Ultimate Team, EA introduced a new concept – generating revenue via in-game purchases. This has caused a lot of debate among the gaming community. And when the company did the same thing with Star Wars Battlefront II, the gaming community erupted in anger and took to social media as well as Reddit to criticize the company.
The controversy was caused due to the loot boxes in the in-game shop. Players could level up by an early unlock of key Star Wars characters like Darth Vader by buying these loot boxes with real money. However, because of the massive gamer backlash about these loot boxes, Electronic Arts had to disable all in-game buys one day before the game was due to launch.
O’Shea said that when EA introduced such in-game purchases, the backlash from the game’s fans was immediate and strongly negative. Battlefront II did not come close to estimated sales, and EA had to finally remove the in-game loot box purchases that had upset fans so badly. He added that this was the first key indication that growth for the games would being to decline.
The other side of the coin is that if the gaming giant’s stocks continue to fall at this time, it may end up surprising markets as well as investors this year. According to some analysts, the fact that Electronic Arts had a difficult 2018 means that it has room to give everyone a pleasant surprise in terms of both performance as well as an increase in stock price in 2019.