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 is partly due to a broader decline in gaming demand, as well as fewer releases. Despite this, EA stock has room for growth from its current levels of $125. In this article, we will discuss Electronic Arts’ stock performance, key takeaways from its recent results, and valuation.
EA stock has seen a 15% decline from levels of $145 in early January 2021 to around $125 now, compared to a 40% increase for the S&P 500 over the same period. However, the decrease in EA stock has not been consistent, with returns of -8%, -7%, and 12% in 2021, 2022, and 2023, respectively. In comparison, the S&P 500 had returns of 27%, -19%, and 24% during the same years, indicating underperformance by EA. The Trefis High Quality Portfolio, consisting of 30 stocks, has consistently outperformed the S&P 500 over the same period.
Looking ahead, in the current uncertain macroeconomic environment, EA could face challenges and underperform the S&P over the next 12 months. However, from a valuation perspective, EA stock has room for growth, with an estimated valuation of $143 per share, reflecting around 15% upside from its current price. This forecast is based on a P/E multiple of under 19x for EA and expected earnings of $7.66 per share for fiscal 2025. Electronic Arts’ revenue of $1.8 billion in Q4 was down 5% year-over-year, partly due to a tough comparison with the prior-year quarter.
Electronic Arts’ outlook for fiscal 2025 was softer than anticipated, with expected bookings in the range of $7.3 billion to $7.7 billion and adjusted earnings in the range of $7.05 to $7.85 per share. This is compared to $7.4 billion in bookings and $6.92 adjusted earnings per share in fiscal 2024. Despite near-term headwinds from declining gaming demand, this is already priced into the stock. While EA stock has room for growth, it is important to compare how Electronic Arts’ Peers fare on important metrics.
In conclusion, Electronic Arts’ recent earnings report showed a decline in revenues and earnings compared to street estimates. The company faces challenges in the gaming industry, with a decline in overall gaming demand and fewer releases impacting its performance. Despite this, EA stock has room for growth from its current levels, with a valuation estimated at $143 per share. While the outlook for fiscal 2025 is softer than anticipated, near-term headwinds are already priced into the stock. Overall, Electronic Arts remains a key player in the gaming industry, with potential for future growth.
