BMO Capital downgraded Electronic Arts Inc (NASDAQ:EA) to a Market Perform rating (from Outperform) and cut their price target on the stock to $125.00 (from $150.00) following a decision by the UK Competition and Markets Authority to block the Microsoft (NASDAQ:MSFT)/Activision Blizzard (NASDAQ:ATVI) deal.
Analysts believe this reduction to be “appropriate given lingering concerns about EA's mobile strategy and general pressure on video game spending.”
They wrote in a note, “A key component to our Outperform thesis was consolidation in the video game industry. We think large tech firms are eager to bolster video game offerings. But, we think the tumultuous and costly MSFT/ATVI experience, culminating with a critical UK rejection, could dissuade potential suitors from attempting big, multi-billion dollar deals, perhaps turning towards more bite-sized, sub-$1 billion deals, thereby reducing the takeout premium built into EA shares.”
Shares of EA are down 0.90% in premarket trading on Thursday.