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Electronic Arts (EA)
NASDAQ:EA
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Electronic Arts
(NASDAQ:EA)66Neutral
Positive Factors
Future Game Releases
EA has hinted at a new Mass Effect title, a new Iron Man game, a new Black Panther title, and two separate Star Wars titles, suggesting a strong lineup for FY:26 and FY:27.
Game Monetization
EA's Skate will be free-to-play, including cross-play and cross-progression on console, PC, and mobile. The game will leverage a micro-transaction model that is not pay-to-win, suggesting monetization potential.
Licensing and IP
A moat of IP - EA's licensing agreements with John Madden, the NFL, as well as licenses across FC and College Football make it extremely difficult for competitors to create similar content that consumers want to purchase.
Negative Factors
Competition
A launch of Tony Hawk Pro Skater 3 + 4 could challenge EA's anticipated launch of Skate.
Execution Challenges
Given recent executional challenges (Dragon Age), there is a preference to remain on the sidelines until there is more confidence in EA's ability to drive growth through its non-annualized franchises.
Revenue Performance
Revenues were down year-over-year due to disappointing sales of Dragon Age Veilguard, a well-reviewed game that appears to have failed to resonate with consumers, and the disappointing performance of EA’s Global Football business.
Electronic Arts (EA) vs. S&P 500 (SPY)
Market Cap
$34.35B
Dividend Yield0.58%
Average Volume (3M)5.32M
Price to Earnings (P/E)33.5
Beta (1Y)0.65
Revenue Growth-2.99%
EPS Growth-0.46%
CountryUS
Employees13,700
SectorCommunication Services
Sector Strength85
IndustryInteractive Multi-Media
Share Statistics
EPS (TTM)3.93
Shares Outstanding260,617,580
10 Day Avg. Volume5,106,779
30 Day Avg. Volume5,316,928
Financial Highlights & Ratios
PEG Ratio3.89
Price to Book (P/B)N/A
Price to Sales (P/S)4.68
Price to Cash Flow (P/CF)7.30
P/FCF Ratio7.20
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$146.85Price Target Upside9.55% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering21
Electronic Arts Business Overview & Revenue Model
Company DescriptionCalifornia-based Electronic Arts provides digital interactive entertainment. It develops and delivers games, content, and online services for Internet-connected consoles, mobile devices, and personal computers.
How the Company Makes MoneyElectronic Arts generates revenue primarily through the sale of video games and related content across various platforms, including consoles, PCs, and mobile devices. The company makes money through three key revenue streams: game sales, live services, and subscription services. Game sales include initial purchases of full games, which can be physical or digital. Live services encompass in-game purchases, downloadable content (DLC), and microtransactions, where players buy virtual goods or enhancements to improve their gaming experience. Subscription services, such as EA Play, offer access to a library of games and early trials for a monthly or annual fee. Additionally, EA benefits from strategic partnerships with major technology companies and sports leagues, which enhance its game offerings and extend its market reach.
Electronic Arts Financial Statement Overview
Summary
Electronic Arts demonstrates strong financial health with solid profitability, efficient use of equity, and strong cash generation capabilities. While revenue growth has been modest and there is moderate leverage, the company's strong margins and cash flow metrics position it well within the Interactive Multi-Media industry.Income Statement
Electronic Arts demonstrates strong profitability with a consistent gross profit margin and net profit margin over the years. The TTM (Trailing-Twelve-Months) data shows a gross profit margin of approximately 78.35% and a net profit margin of 14.28%, indicating efficient cost management. Revenue growth has been moderate, with a slight decline noted in the latest TTM compared to the previous annual report. EBIT and EBITDA margins are healthy, reflecting robust operational performance.85
Very Positive
Balance Sheet
The company maintains a stable balance sheet with a debt-to-equity ratio of 0.25 in TTM, indicating prudent leverage levels. The return on equity is solid at 14.15%, showcasing effective use of shareholder funds. However, the equity ratio of 55.10% suggests a moderate dependence on liabilities, which is typical for the industry but may pose risks if liabilities grow significantly.78
Positive
Cash Flow
Electronic Arts has demonstrated strong cash flow generation with a substantial free cash flow growth rate of 40.85% in the latest annual period, although it shows a decline in the TTM. The operating cash flow to net income ratio is approximately 2.01 in TTM, indicating excellent conversion of earnings into cash. However, the free cash flow to net income ratio shows a decrease in TTM, suggesting potential pressures on free cash flow sustainability.82
Very Positive
| Breakdown | |||||
| TTM | Mar 2024 | Mar 2023 | Mar 2022 | Mar 2021 | Mar 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 7.34B | 7.56B | 7.43B | 6.99B | 5.63B | 5.54B | Gross Profit |
| 5.75B | 5.85B | 5.63B | 5.13B | 4.13B | 4.17B | EBIT |
| 1.45B | 1.52B | 1.33B | 1.13B | 1.05B | 1.45B | EBITDA |
| 1.90B | 1.99B | 1.81B | 1.61B | 1.23B | 1.70B | Net Income Common Stockholders |
| 1.05B | 1.27B | 802.00M | 789.00M | 837.00M | 3.04B |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 3.06B | 3.26B | 2.77B | 3.06B | 6.37B | 5.74B | Total Assets |
| 13.80B | 13.42B | 13.46B | 13.80B | 13.29B | 11.11B | Total Debt |
| 1.96B | 1.95B | 1.88B | 1.96B | 1.88B | 996.00M | Net Debt |
| -773.00M | -952.00M | -544.00M | -773.00M | -3.38B | -2.77B | Total Liabilities |
| 6.17B | 5.91B | 6.17B | 6.17B | 5.45B | 3.65B | Stockholders Equity |
| 7.63B | 7.51B | 7.29B | 7.63B | 7.84B | 7.46B |
| Cash Flow | Free Cash Flow | ||||
| 1.89B | 2.12B | 1.34B | 1.71B | 1.81B | 1.66B | Operating Cash Flow |
| 2.11B | 2.31B | 1.55B | 1.90B | 1.93B | 1.80B | Investing Cash Flow |
| -226.00M | -207.00M | -217.00M | -2.80B | -505.00M | -1.36B | Financing Cash Flow |
| -1.81B | -1.62B | -1.60B | -1.62B | -15.00M | -1.36B |
Electronic Arts Technical Analysis
Neutral
134.05
Price Trends
134.50
Negative
145.20
Negative
143.34
Negative
Market Momentum
-0.46
Negative
55.42
Neutral
55.51
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For EA, the sentiment is Neutral. The current price of 134.05 is above the 20-day moving average (MA) of 130.73, below the 50-day MA of 134.50, and below the 200-day MA of 143.34, indicating a neutral trend. The MACD of -0.46 indicates Negative momentum. The RSI at 55.42 is Neutral, neither overbought nor oversold. The STOCH value of 55.51 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for EA.
Electronic Arts Risk Analysis
Electronic Arts disclosed 26 risk factors in its most recent earnings report. Electronic Arts reported the most risks in the “Tech & Innovation” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Electronic Arts Peers Comparison
Overall Rating
UnderperformOutperform
Sector (59)
Financial Indicators
Performance Comparison
EA
Electronic Arts
134.05
-0.75
-0.56%
TTWO
Take-Two
214.81
70.91
49.28%
NTDOY
Nintendo Co
18.82
5.10
37.17%
UBSFY
UBISOFT Entertainment
2.74
-1.69
-38.15%
Electronic Arts Earnings Call Summary
Earnings Call Date: Feb 4, 2025 | % Change Since: 10.71% | Next Earnings Date: May 6, 2025
Earnings Call Sentiment Neutral
The earnings call presented a mixed picture with significant challenges, particularly in the performance of EA Sports FC and Dragon Age, leading to reduced guidance for the fiscal year. However, there were also notable achievements, including growth in the American football ecosystem, positive responses to updates in EA Sports FC, and strong performance from The Sims franchise. The acquisition of TRACAB Technologies also promises future enhancements. Despite the setbacks, EA remains optimistic about future growth.Highlights
American Football Ecosystem Growth
The number of players in the American football ecosystem is up double digits year-over-year, with Ultimate Team players growing by double digits.
Positive Response to Gameplay Update
The January 16 gameplay update and Team of the Year event for EA Sports FC reactivated over two million Ultimate Team players and saw record weekly active users, leading to year-over-year growth during the event.
Strong Performance of The Sims Franchise
The Sims franchise delivered year-over-year net bookings growth in Q3, with the MySim: Cozy Bundle outperforming expectations and over 50% of purchasers being new to EA.
Acquisition of TRACAB Technologies
EA reached an agreement to acquire TRACAB Technologies, enhancing their capabilities in optical sports tracking and real-time volumetric data capture technology.
Lowlights
Underperformance of Global Football Franchise
The global football franchise, including EA Sports FC, saw a mid-single-digit decline in net bookings year-over-year in Q3. The underperformance was due to soft acquisition and engagement churn.
Dragon Age: The Veilguard Underperformance
Dragon Age: The Veilguard underperformed due to competitive dynamics in the single-player RPG market.
Apex Legends Net Bookings Decline
Apex Legends saw a year-over-year decline in net bookings, although the performance was in line with expectations.
Reduced Fiscal Year 2025 Guidance
Fiscal Year 2025 net bookings guidance was reduced to a range of $7 billion to $7.15 billion, down 6% to 4% year-over-year.
Company Guidance
During Electronic Arts' third quarter fiscal year 2025 earnings call, the company provided detailed insights into its financial performance and future guidance. CEO Andrew Wilson acknowledged that the quarter did not meet financial expectations, highlighting the underperformance of key titles such as Dragon Age and EA Sports FC. Despite starting strong, EA Sports FC experienced a mid-single-digit decline in net bookings due to lower-than-expected player acquisition and engagement. However, a significant gameplay update in January led to a resurgence in player activity, with over two million Ultimate Team players reactivated and record net bookings during the Team of the Year event. The company remains optimistic about fiscal year 2026, with expectations for growth driven by upcoming releases like EA Sports College Football 26 and Battlefield, alongside a strategic focus on expanding their American football ecosystem. CFO Stuart Canfield also announced a $1 billion accelerated stock repurchase, underscoring confidence in EA's long-term growth outlook.Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.