Earnings Beat In The Cards For Electronic Arts’ Q4?

EA: Electronic Arts logo
Electronic Arts

Electronic Arts (NASDAQ: EA) is scheduled to report its fiscal FYQ4 2023 results on Tuesday, May 9. We expect EA to post revenue and earnings exceeding the consensus estimates. The company should benefit from continued demand for some of its popular titles, including FIFA 23, Need For Speed Unbound, and The Sims. Although we expect EA stock to navigate well during the quarter, it has little room for growth, as discussed below. Our interactive dashboard analysis on Electronic Arts Earnings Preview has additional details.

(1) Revenues expected to be slightly above the consensus estimates

  • Trefis estimates Electronic Arts’ fiscal Q4 2023 revenues to be around $1.79 billion, marginally above the $1.76 billion consensus estimate. The company has guided for its revenue to be between $1.70 – $1.80 billion, reflecting a slight decline from its $1.83 billion figure in the prior-year quarter.
  • The company should continue to benefit from its live services offering, primarily for the FIFA franchise.
  • Looking back at Q3, the company reported revenue of $1.88 billion, reflecting a 5% y-o-y growth. However, total bookings of $2.34 billion were down 9% y-o-y, primarily due to changes in deferred revenues.
  • Looking at revenues by platform, PC & Other revenue was up a solid 16% y-o-y, while Mobile platform sales were up 6%, and console up 1%.
  • Our dashboard on Electronic Arts Revenues offers more details on the company’s segments.
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(2) EPS likely to be above the consensus estimates

  • Electronic Arts’ fiscal Q4 2023 adjusted earnings per share (EPS) is expected to be $1.39 per Trefis analysis, comfortably above the $1.32 consensus estimate. The company has guided its adjusted earnings to be in the range of $1.20 and $1.40.
  • The company’s adjusted net income of $778 million in fiscal Q3 2023 reflected a 14% decline from its $902 million figure in the prior year’s quarter.
  • The company is focused on reducing its advertising costs, which should bolster its operating margins in the coming quarters. Electronic Arts’ operating income margin has declined from 26% in fiscal 2020 to 18% in the last twelve months. Our Electronic Arts Operating Income Comparison dashboard has more details.
  • For the full-fiscal 2023, we forecast adjusted EPS to be lower at $6.11, compared to $7.02 in fiscal 2022.

(3) EA stock looks like it has little room for growth

  • We estimate Electronic Arts’ Valuation to be around $138 per share, just 10% above its current market price of $125.
  • At its current levels, EA stock is trading at about 20x forward adjusted earnings estimate of $6.11, compared to the last three-year average of 22x, implying little room for growth.
  • If the company reports upbeat Q4 results and provides an outlook for fiscal 2024 better than the street estimates, it is likely that the P/E multiple will be revised upward, resulting in higher levels for EA stock.
While EA stock looks like it has more room to grow, it is helpful to see how Electronic Arts’ Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

Furthermore, the Covid-19 crisis and recent market volatility have created many pricing discontinuities that can offer attractive trading opportunities. For example, you’ll be surprised at how counter-intuitive the stock valuation is for Teradata vs. Crane.

Despite higher inflation and the Fed raising interest rates, Electronic Arts stock has risen 2% this year. But can it drop from here? See how low Electronic Arts stock can go by comparing its decline in previous market crashes. Here is a performance summary of all stocks in previous market crashes.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

 Returns May 2023
MTD [1]
YTD [1]
Total [2]
 EA Return -2% 2% 59%
 S&P 500 Return -1% 8% 85%
 Trefis Multi-Strategy Portfolio -1% 7% 238%

[1] Month-to-date and year-to-date as of 5/4/2023
[2] Cumulative total returns since the end of 2016

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