Now trading at a price of $133.88, Electronic Arts has moved -0.4% so far today.
Over the last year, Electronic Arts logged a 4.0% change, with its stock price reaching a high of $140.3 and a low of $108.53. Over the same period, the stock underperformed the S&P 500 index by -11.0%. As of April 2023, the company's 50-day average price was $124.79. Electronic Arts Inc. develops, markets, publishes, and distributes games, content, and services for game consoles, PCs, mobile phones, and tablets worldwide. Based in Redwood City, CA, the large-cap Technology company has 13,400 full time employees. Electronic Arts has offered a 0.6% dividend yield over the last 12 months.
Low Leverage Levels but a Declining EPS Growth Trend:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $5,150 | $4,950 | $5,537 | $5,629 | $6,991 | $7,426 |
| Gross Margins | 75% | 73% | 75% | 73% | 73% | 76% |
| Operating Margins | 28.0% | 22.0% | 27.0% | 19.0% | 16.0% | 18.0% |
| Net Margins | 20.0% | 21.0% | 55.0% | 15.0% | 11.0% | 11.0% |
| Net Income (MM) | $1,043 | $1,019 | $3,039 | $837 | $789 | $802 |
| Net Interest Expense (MM) | $44 | $83 | $63 | $45 | $58 | $58 |
| Depreciation & Amort. (MM) | $136 | $145 | $150 | $181 | $486 | $536 |
| Earnings Per Share | $3.34 | $3.33 | $10.3 | $2.87 | $2.76 | $2.88 |
| Diluted Shares (MM) | 312 | 306 | 295 | 292 | 286 | 278 |
| Free Cash Flow (MM) | $1,070 | $1,378 | $1,657 | $1,673 | $1,711 | $1,343 |
| Capital Expenditures (MM) | $622 | $169 | $140 | $124 | $188 | $207 |
| Net Current Assets (MM) | $2,734 | $2,705 | $3,264 | -$1,955 | -$2,077 | -$2,175 |
| Long Term Debt (MM) | $994 | $995 | $609 | $1,878 | $1,879 | $1,880 |
| Net Debt / EBITDA | -1.83 | -2.13 | -2.51 | -0.65 | -0.2 | -0.2 |
A Lower P/B Ratio Than Its Sector Average but Trades Above Its Graham Number:
Electronic Arts has a trailing twelve month P/E ratio of 34.4, compared to an average of 27.16 for the Technology sector. Based on its EPS guidance of $7.8, the company has a forward P/E ratio of 16.0. The company doesn't issue forward earnings guidance, and the compound average growth rate of its last 6 years of reported EPS is -2.4%. On this basis, the company's PEG ratio is -14.09, which indicates that its shares are overpriced. In contrast, the market is likely undervaluing Electronic Arts in terms of its equity because its P/B ratio is 4.77 while the sector average is 6.23. The company's shares are currently trading 222.7% above their Graham number. In conclusion, Electronic Arts's impressive cash flow trend, decent P/B ratio, and reasonable use of leverage demonstrate that the company may still be fairly valued — despite its elevated earnings multiple.
There's an Analyst Consensus of Some Upside Potential for Electronic Arts:
The 24 analysts following Electronic Arts have set target prices ranging from $128.0 to $162.0 per share, for an average of $145.96 with a buy rating. As of April 2023, the company is trading -14.5% away from its average target price, indicating that there is an analyst consensus of some upside potential.
Electronic Arts has a very low short interest because 1.1% of the company's shares are sold short. Institutions own 95.7% of the company's shares, and the insider ownership rate stands at 0.3%, suggesting a small amount of insider investors. The largest shareholder is Blackrock Inc., whose 10% stake in the company is worth $3,588,748,702.
