Jefferies analysts have initiated coverage on Electronic Arts (EA) with a Buy rating and Roblox (RBLX) with a Hold rating. They see EA as a more attractive investment due to its strong game pipeline and expected margin expansion. EA Sports FC, the rebranded FIFA franchise, is expected to benefit from the World Cup and the addition of College Football. These factors, along with the ongoing execution of EA’s strategy, are expected to drive mid-single-digit percentage growth in the sports segment.
Beyond sports, EA boasts a robust new game pipeline, featuring more large titles than Take-Two Interactive (TTWO). While none of these titles are expected to match the scale or immediate impact of GTA VI, Jefferies analysts expect discussions about EA’s pipeline to take center stage in the second half of the year. This, combined with anticipated margin leverage of over 350 basis points over the next three years, positions EA favorably.
Meanwhile, Roblox faces a premium valuation and recent execution concerns, despite its dominant position in the user-generated content space for young audiences. While Roblox has the potential to achieve 20% bookings growth in the future, analysts acknowledge concerns about its recent performance, having missed top-line expectations in two of the last four quarters.
Roblox’s valuation also remains high, trading at 32x FY25 EBITDA, a 37% premium to its peers on a growth-adjusted basis. In contrast, EA’s robust game pipeline and margin improvement prospects make it a more compelling investment opportunity at this time.
Jefferies’ analysis highlights the contrasting fortunes of two leading gaming companies. While EA offers a more certain path to growth with a solid pipeline of games and potential for margin expansion, Roblox’s high valuation and recent execution issues make it a riskier investment.