Electronic Arts Inc. (EA), headquartered in Redwood City, California, develops, markets, publishes, and delivers games, content, and services for game consoles, PCs, mobile phones, and tablets. Valued at $40.6 billion by market cap, the company alsoprovides advertising services and licenses its games to third parties to distribute and host games.
Companies worth $10 billion or more are generally described as “large-cap stocks,” and EA perfectly fits that description, with its market cap exceeding this mark, underscoring its size, influence, and dominance within the electronic gaming & multimedia industry. EA leverages its iconic brand portfolio, including Madden, Battlefield, and Apex Legends, to foster customer loyalty and recurring revenue. The successful rebranding to EA SPORTS FC showcases adaptability and strategic franchise management. EA's focus on live services and digital distribution drives its revenue growth, enhancing customer engagement and providing a steady revenue stream beyond initial game sales.
Despite its notable strength, EA slipped 11% from its 52-week high of $168.50, achieved on Nov. 22. Over the past three months, EA stock has gained 6.7%, underperforming the Nasdaq Composite’s ($NASX)10.4% gains during the same time frame.
In the longer term, shares of EA rose 9.6% on a YTD basis and climbed 8.6% over the past 52 weeks, underperforming NASX’s YTD gains of 29.2% and solid 30.1% returns over the last year.
Despite the positive price momentum, EA has been trading below its 50-day moving average recently. However, the stock is trading above its 200-day moving average since late May.
Electronic Arts' underperformance can be linked to slow growth in traditional game sales and increased competition within the video game industry, posing challenges for the company's future prospects.
On Oct. 29, EA shares closed up by 1% after reporting its Q2 results. Its adjusted EPS of $2.15 exceeded Wall Street expectations of $2.03. The company’s revenue stood at $2 billion, up 5.8% year over year. EA expects full-year adjusted EPS to be $3.82 to $4.33, and it expects revenue in the range of $7.4 billion to $7.7 billion.
EA’s rival, PLAYSTUDIOS, Inc. (MYPS), has had a rough ride. MYPS' shares plummeted 26.9% in 2024 and 25.6% over the past 52 weeks.
Wall Street analysts are moderately bullish on EA’s prospects. The stock has a consensus “Moderate Buy” rating from the 25 analysts covering it, and the mean price target of $165.25 suggests a potential upside of 10.2% from current price levels.
