Electronic Arts Stock Up 17% in One Month, Now Is Not The Time To Buy The Stock
We believe there is a near-equal mix of good and bad in EA stock given its overall Moderate operating performance and financial condition. But keeping in mind its Very High valuation, we think that the stock is Unattractive. Here is our multi-factor assessment.
| CONCLUSION | |
|---|---|
| What you pay: | |
| Valuation | Very High |
| What you get: | |
| Growth | Weak |
| Profitability | Moderate |
| Financial Stability | Very Strong |
| Downturn Resilience | Moderate |
| Operating Performance | Moderate |
| Stock Opinion | Unattractive |
EA stock has jumped meaningfully recently and we currently find it unattractive. This may feel like a caution, and there is significant risk in relying on a single stock. However, there is a huge value to a broader diversified approach we take with Trefis High Quality Portfolio. Trefis works with Empirical Asset Management – a Boston area wealth manager – whose asset allocation strategies yielded positive returns during the 2008-09 period when the S&P lost more than 40%. Empirical has incorporated the Trefis HQ Portfolio in this asset allocation framework to provide clients better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.
Let’s get into details of each of the assessed factors but before that, for quick background: With $50 Bil in market cap, Electronic Arts provides development, marketing, publishing, and distribution of games and services across consoles, PCs, and mobile devices through digital, retail channels, and third-party licensing.
[1] Valuation Looks Very High
- S&P 500 Movers | Winners: EA, PCAR, CDW | Losers: COST, ORCL, EBAY
- EA Shares Rally 17% In A Month, Now Is Not The Time To Buy The Stock
- EA Stock Up 10% after 5-Day Win Streak
- S&P 500 Movers | Winners: TKO, ALB, EA | Losers: INTU, HSY, EPAM
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| EA | S&P 500 | |
|---|---|---|
| Price-to-Sales Ratio | 6.7 | 3.3 |
| Price-to-Earnings Ratio | 48.3 | 24.0 |
| Price-to-Free Cash Flow Ratio | 28.8 | 21.1 |
This table highlights how EA is valued vs broader market. For more details see: EA Valuation Ratios
[2] Growth Is Weak
- Electronic Arts has seen its top line grow at an average rate of 1.3% over the last 3 years
- Its revenues have grown 2.4% from $7.3 Bil to $7.5 Bil in the last 12 months
- Also, its quarterly revenues grew 0.7% to $1.7 Bil in the most recent quarter from $1.7 Bil a year ago.
| EA | S&P 500 | |
|---|---|---|
| 3-Year Average | 1.3% | 5.3% |
| Latest Twelve Months* | 2.4% | 5.2% |
| Most Recent Quarter (YoY)* | 0.7% | 6.1% |
This table highlights how EA is growing vs broader market. For more details see: EA Revenue Comparison
[3] Profitability Appears Moderate
- EA last 12 month operating income was $1.5 Bil representing operating margin of 19.8%
- With cash flow margin of 26.4%, it generated nearly $2.0 Bil in operating cash flow over this period
- For the same period, EA generated nearly $1.0 Bil in net income, suggesting net margin of about 13.9%
| EA | S&P 500 | |
|---|---|---|
| Current Operating Margin | 19.8% | 18.6% |
| Current OCF Margin | 26.4% | 20.3% |
| Current Net Income Margin | 13.9% | 12.7% |
This table highlights how EA profitability vs broader market. For more details see: EA Operating Income Comparison
[4] Financial Stability Looks Very Strong
- EA Debt was $2.0 Bil at the end of the most recent quarter, while its current Market Cap is $50 Bil. This implies Debt-to-Equity Ratio of 3.9%
- EA Cash (including cash equivalents) makes up $1.6 Bil of $12 Bil in total Assets. This yields a Cash-to-Assets Ratio of 13.9%
| EA | S&P 500 | |
|---|---|---|
| Current Debt-to-Equity Ratio | 3.9% | 21.1% |
| Current Cash-to-Assets Ratio | 13.9% | 7.0% |
[4] Downturn Resilience Is Moderate
EA saw an impact slightly worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.
2022 Inflation Shock
- EA stock fell 26.7% from a high of $148.97 on 2 February 2021 to $109.19 on 10 March 2023 vs. a peak-to-trough decline of 25.4% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 30 July 2024
- Since then, the stock increased to a high of $202.05 on 29 September 2025 , and currently trades at $200.05
| EA | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -26.7% | -25.4% |
| Time to Full Recovery | 508 days | 464 days |
2020 Covid Pandemic
- EA stock fell 23.4% from a high of $113.48 on 23 January 2020 to $86.94 on 20 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 15 April 2020
| EA | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -23.4% | -33.9% |
| Time to Full Recovery | 26 days | 148 days |
2008 Global Financial Crisis
- EA stock fell 75.8% from a high of $61.40 on 12 October 2007 to $14.86 on 2 February 2009 vs. a peak-to-trough decline of 56.8% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 8 May 2015
| EA | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -75.8% | -56.8% |
| Time to Full Recovery | 2286 days | 1480 days |
The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – S&P 500, Russell, and S&P midcap. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.