Electronic Arts Is Up By 11%, Here Is Why

Vladimir Zernov
Published: May 11, 2022, 15:12 GMT+00:00

The stock moved away from yearly lows as the company's guidance was stronger than expected.

Electronic Arts

In this article:

Key Insights

  • Electronic Arts beats analyst estimates on earnings and raises its quarterly dividend. 
  • The company’s guidance for 2023 implies further growth. 
  • Electronic Arts is moving away from its long-term partnership with FIFA. 

Electronic Arts Stock Rallies After Strong Report

Shares of Electronic Arts gained strong upside momentum after the company released its fiscal Q4 report. The company reported GAAP earnings of $0.80 per share, beating analyst estimates. Fourth-quarter bookings of $1.75 billion were mostly in line with analyst expectations.

Electronic Arts decided to increase its quarterly cash dividend from $0.17 to $0.19 per share. This decision served as an additional bullish catalyst for the stock.

The company has also announced that it would move away from its partnership with FIFA and that its soccer games will be released under the EA Sports FC brand from 2023. Electronic Arts paid up to $150 million per year for the right to use the FIFA brand, so the company will save some money.

At the same time, FIFA has already announced that it would develop a “major new simulation football title for 2024”, so the competition in this market segment will increase.

What’s Next For Electronic Arts?

Electronic Arts stock has been moving lower for several months amid concerns about the slowdown in the video game industry. However, the report indicated that demand for the company’s products remained strong.

In the next fiscal year, Electronic Arts expects net bookings of $7.9 billion – $8.1 billion, compared to $7.52 billion in 2022. The company also expects to report net income of $793 million – $815 million.

The market feared that Electronic Arts’ results and guidance would be worse, so traders rushed to buy the stock that was down by about 15% in 2022 ahead of the release of the earnings report.

The stock is trading at roughly 15 forward P/E, so it remains reasonably cheap even after today’s rally. In this light, Electronic Arts stock has a good chance to gain additional upside momentum in the upcoming weeks.

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About the Author

Vladimir is an independent trader and analyst with over 10 years of experience in the financial markets. He is a specialist in stocks, futures, Forex, indices, and commodities areas using long-term positional trading and swing trading.

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