Wells Fargo Initiates Coverage on Electronic Arts (ERTS) with a Market Perform

November 23, 2009 4:42 PM EST

Wells Fargo initiates coverage on Electronic Arts, Inc. (Nasdaq: ERTS) with a Market Perform rating. Price range $17-19

Wells analyst says, "Our cautious view is fueled by franchise fatigue in several key EA properties, which has led to increased operating expenses as the company rebuilds its portfolio of games. While additional restructuring should improve the cost structure, a reduced SKU count with few high-profile hits may struggle to deliver the top-line growth we think is needed to drive the stock higher from current levels. As a result, we believe shares of EA are fully valued at 19x our CY2010 EPS estimate of $0.98...Few near-term catalysts...Need to invest limiting leverage in the model...FQ4 2010 looks solid, but FY2011 visibility limited...Despite the above concerns, EA has delivered meaningful game quality improvements over the last two years...We think shares of Electronic Arts are likely to remain range bound pending further evidence that recent improvements in game quality can consistently deliver better growth and profitability."

To see all the upgrades/downgrades on shares of ERTS, visit our Analyst Ratings page.

Electronic Arts Inc. develops, markets, publishes, and distributes video game software and content.

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