EA - Embedded Expectations Analysis - 2019 01 15
Electronic Arts Inc. (EA:USA) currently trades near recent averages relative toUAFRS-based (Uniform) Earnings, with a 19.6x Uniform P/E. At these levels, the market has relatively bearish expectations for the firm, and management is concerned about their outlook for new release earnings, their engagement with users, and their outlook for the holiday season
Specifically, management is confident in their position as an industry-leader. Management also is confident of the collaboration between teams with different video-game genre focuses. However, management lacks confidence in their ability to deliver revenue and earnings from their new game launches. They also may lack confidence in their ability to increase the popularity of Live Events, as well as in their ability to grow in the mobile-gaming segment and where the space will go in coming years. Moreover, management may be exaggerating their position when it comes to holiday sales and their ability to increase the sales of the Madden franchise by increasing the amount of features in-game. Finally, management may lack confidence in their ability to connect users across platforms and continue to monetize the in-game experience
Electronic Arts develops, markets, publishes and distributes games, content and services that can be played and watched on a variety of platforms, including game consoles, personal computers, and mobile phones. The company markets and sells its games and services through digital distribution channels and through retail channels. Digitally, the company's console games and services can be purchased through third-party storefronts. In its games and services, the company utilizes brands that it either wholly own or license from others. The company develops and publishes games and services across genres. Within and alongside its games, the company provides live services, including in-game purchases, downloadable content, and esports.
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