Redwood City, California-based Electronic Arts Inc. (EA) develops, markets, publishes, and delivers games, content, and services for consoles, PCs, mobile phones, and tablets worldwide. With a market cap of $42.3 billion, Electronic Arts distributes its products through multiple distribution channels and directly to consumers through its online portals.
The gaming giant has lagged behind the broader market over the past year. Electronic Arts’ stock prices are up 17.9% on a YTD basis and 20% over the past year, underperforming the S&P 500 Index’s ($SPX) 23.1% gains in 2024 and 30.4% returns over the past 52-week period.
Narrowing the focus, Electronic Arts has also underperformed the VanEck Video Gaming and eSports ETF’s (ESPO) surge of 39.2% in 2024 and 42.4% over the past year.
Despite underperforming the broader market over the past year, Electronic Arts has outperformed recently, EA stock prices have soared over 10% in the past month which is primarily driven by the market’s positive reaction to the release of its earnings results. EA stock prices rose 2.4% and maintained a positive momentum for the next six trading sessions after the release of its better-than-expected Q2 earnings on Oct. 29. The company delivered another strong quarter with record Q2 net bookings surging 14.2% year-over-year to $2.1 billion which surpassed management’s upper-end guidance, driven by the impressive performance across its EA SPORT’s portfolio.
Moreover, EA’s adjusted EPS of $1.62 surpassed analysts’ earnings estimates by a notable 5.9% meanwhile, its net revenues grew 5.8% year-over-year to $2 billion driven by recovery in Live services and full game revenues, exceeding Wall Street’s topline expectations. Observing the solid performance during the quarter, Electronic Arts raised its full-year revenues, earnings, and cash flow projections, bolstering investors’ confidence.
For the current fiscal year, ending in March 2025, analysts expect EA to report a 12.3% year-over-year growth in adjusted EPS to $5.84. The company’s earnings surprise history is mixed. It surpassed analysts’ bottom-line estimates in three of the past four quarters while missing on another occasion.
EA stock has a consensus “Moderate Buy” rating overall. Among the 25 analysts covering the stock, 13 recommend “Strong Buy,” two advise “Moderate Buy,” and 10 suggest a “Hold” rating.
This configuration is slightly more bullish than a month ago, when 12 analysts recommended a “Strong Buy” rating.
On Oct. 30, Roth MKM analyst Eric Handler maintained a “Neutral” rating while raising the price target to $158.
Although EA’s mean price target of $163.50 represents a modest 1.3% premium to current price levels, the Street-high target of $183 suggests a potential upside of 13.4%.
