EA - Embedded Expectations Analysis - 2019 06 17
Electronic Arts Inc. (EA:USA) currently trades below recent averages relative to UAFRS-based (Uniform) Earnings, with a 16.4x Uniform P/E. At these levels, the market has bearish expectations for the firm, and management has concerns about the total addressable market of players, their subscription model, and game updates and testing.Specifically, management may be exaggerating their outlook for growth in the total addressable market of players and the depth and complexity of new games, and may be concerned about their ability to create subscription content. Also, they may be exaggerating the number of subscribers that third partner partnerships would bring, the cost savings offered to subscribers, and the attractiveness of a subscription model to risk-averse gamers. Finally, they may be concerned about Battlefield V updates, early user testing for mobile games, and their ability to continue growing online viewership for Madden tournaments.
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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