Piper Jaffray Cuts Their Price Target on Electronic Arts (ERTS) to $17; Maintains Neutral

January 5, 2009 9:16 AM EST

Piper Jaffray cuts their price target on Electronic Arts (NASDAQ: ERTS) from $18 to $17 and maintains their Neutral rating.

The firm also lowers their FY10E EPS estimate from $1.00 to $0.65. However, the firm said, "Visibility is limited and we expect our estimates could experience material changes (up/down) in the coming months."

Piper Jaffray believes that EA's restructuring, which is expected to yield $120M in annual cost savings, is not enough. Instead, the firm said, "We calculate that EA needs to reduce its R&D spending by $200M alone to set the framework for sustainable profitability. We expect EA is losing huge sums of money when factoring in one-time charges and non-GAAP adjustments. In our opinion, EA's business turnaround has progressed too slow and too late in the cycle. Growth for the current game cycle is over, and EA is now faced with turning the business around in a declining category during the next few years - EA's room to maneuver is limited."

Piper believes that EA's stock “"will remain under pressure for some time" due to a mounting list of concerns and a lack of confidence in the company’s long-term strategies.

Electronic Arts, Inc. engages in the development, marketing, publishing, and distribution of interactive software games and content worldwide.

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