Electronic Arts (NASDAQ: EA) recently reported its Q3 fiscal 2025 results (fiscal ends in March), with revenues missing and earnings exceeding the street estimates. The company reported net bookings of $2.22 billion and earnings of $1.11 per share, compared to the consensus estimates of $2.32 billion and $1.08, respectively. Softer demand for its game Dragon Age weighed on the overall performance. The company lowered its full-year outlook. On the positive side, it announced an accelerated $1 billion share repurchase plan, which boded well for its stock.
EA stock, with -4% returns since the beginning of 2024, has underperformed the S&P 500 index, up 27%. This can be attributed to a broader decline in gaming demand. If you want upside with a smoother ride than an individual stock, consider the High-Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.
Electronic Arts’ revenue of $1.9 billion in Q3 was down 3% y-o-y. This can partly be attributed to a lower contribution of extra content from EA Sports FC Ultimate Team and Apex Legends. The demand for football gaming as well as Dragon Age was softer than anticipated. Electronic Arts saw its operating margin expand by 120 bps to 20% in Q3. Its profit of $1.11 per share in Q3’25, reflected a 4% rise from its $1.07 figure in the prior-year quarter. Not only did Electronic Arts post a mixed Q3, its outlook for fiscal 2025 was softer than anticipated. The company expects its bookings to be in the range of $7.0 billion and $7.15 billion and adjusted earnings to be in the range of $6.25 and $6.65 per share in fiscal 2025. This compares with $7.4 billion in bookings and $6.92 adjusted earnings per share it reported in fiscal 2024.
EA stock surged 8% post the Q3 announcement, primarily reflecting the investor optimism from its share buyback plan. Looking at a slightly longer time frame, the performance of EA stock with respect to the index over the last four-year period has been lackluster. Returns for the stock were -8% in 2021, -7% in 2022, 13% in 2023, and 7% in 2024.
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Given the current uncertain macroeconomic environment around rate cuts and trade wars, could EA face a similar situation as it did in 2021, 2023, and 2024 and underperform the S&P over the next 12 months — or will it see a strong jump? We estimate Electronic Arts’ Valuation to be $142 per share, around 9% above its current market price. Our forecast is based on 21x forward expected earnings of $6.71 for EA in 2025. The 21x figure aligns with the stock’s average P/E ratio over the last five years.
While EA stock looks like it has little room for growth, it is helpful to see how Electronic Arts’ Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.
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