Electronic Arts (NYSE: EA) recently reported its Q4 fiscal 2024 results, with revenues and earnings falling below street estimates. The company reported net bookings of $1.67 billion and adjusted earnings of $1.37 per share, compared to consensus estimates of $1.78 billion and $1.52, respectively. This decline can be attributed to a broader decline in gaming demand, partly due to fewer releases. Looking at EA stock, analysts believe it has room for growth from its current levels of $125, and discuss Electronic Arts’ stock performance, key takeaways from its recent results, and valuation.
EA stock has seen a decline of 15% from levels of $145 in early January 2021 to around $125 now, versus an increase of about 40% for the S&P 500 over this roughly three-year period. Returns for the stock were -8% in 2021, -7% in 2022, and 12% in 2023. In comparison, the S&P 500 returned 27% in 2021, -19% in 2022, and 24% in 2023 — indicating that EA underperformed in 2021 and 2023. Consistently beating the S&P 500 has been difficult for individual stocks in recent years, but the Trefis High Quality Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period.
From a valuation perspective, EA stock looks like it has room for growth. Analysts estimate Electronic Arts’ valuation to be $143 per share, reflecting around 15% upside from its current price of $125. The forecast is based on a little under 19x P/E multiple for EA and expected earnings of $7.66 on a per-share and adjusted basis for the full fiscal 2025. Electronic Arts’ revenue of $1.8 billion in Q4 was down 5% y-o-y, partly due to a tough comparison with the prior-year quarter. The average quarterly playtime fell significantly by 26% between 2021 and 2023.
Electronic Arts’ outlook for fiscal 2025 was softer than anticipated, with expected bookings in the range of $7.3 billion and $7.7 billion and adjusted earnings to be in the range of $7.05 and $7.85 per share. This compares with $7.4 billion in bookings and $6.92 adjusted earnings per share reported in fiscal 2024. While the company will face near-term headwinds from declining gaming demand, analysts believe it is already priced into the stock. Despite the challenges, EA stock has shown potential for growth.
It is also helpful to compare how Electronic Arts’ peers fare on important metrics. Investors can find valuable comparisons for companies across industries at Peer Comparisons. Overall, Electronic Arts’ recent performance may have fallen short of expectations, but the company is poised for potential growth in the future. With room for growth in its stock price and a strong position in the gaming industry, Electronic Arts remains a key player to watch in the coming years. While challenges may persist, EA has the potential to bounce back and deliver strong results in the long term.
