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Category: Stock Market and Electronic Arts
Date: 30 October 2019 Stock Price: $94.41 We take a look at the 2nd quarter earnings report of their 2020 fiscal year of Electronic Arts (EA), the gaming developer that owns gaming brands such as The Sims, Battlefield, Madden NFL and Need for Speed.
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About Electronic Arts (EA)
Electronic Arts (NASDAQ: EA) is a global leader in digital interactive entertainment. The Company develops and delivers games, content and online services for Internet-connected consoles, mobile devices and personal computers. In fiscal year 2019, EA posted GAAP net revenue of $4.95 billion. Headquartered in Redwood City, California, EA is recognized for a portfolio of critically acclaimed, high-quality brands such as EA SPORTS™ FIFA, Battlefield™, Apex Legends™, The Sims™, Madden NFL, Need for Speed™, Titanfall™ and Plants vs. Zombies™
Overview of Electronic Arts 2nd quarter 2020 earnings report
Data below refers to quarterly data unless specified otherwise:
- Net Revenues: $1.348 billion (up from $1.286 billion for the same period of the previous year)
- Net sales increased by 4.82% over the last 12 months
- Cost of revenue: $405 million (down from $418 million for the same quarter of the previous year)
- Cost of decreased by -3.1% over the last 12 months
- Net income: $854 million (up from $255 million from for the same period of the previous year)
- Diluted earnings per share: $2.89 (down from $0.83 for the same period of the previous year)
- PE ratio of Electronic Arts: 8.2
- Diluted weighted-average shares outstanding: 296 million (down from 307 million for the same period of the previous year)
- Cash and cash equivalents $2.94 billion
- Cash and cash equivalents per share: $9.93
- Cash and cash equivalents makes up 10.5% of Electronic Arts' market capital
- Cash and cash equivalents makes up 27.8% of Electronic Arts' total assets
- Accounts receivable: $856 million
- Accounts receivable makes up 8.1% of Electronic Arts total assets
- Goodwill: $1.2 billion
- Goodwill per share: $4.05
- Goodwill makes up 11.3% of Electronic Arts' total assets
- Stockholders equity in Electronic Arts: $7.158 billion
- Stockholders equity per share: $27.96
- Electronic Arts is trading at 3.37 times its stockholders equity which is within the expected range of between 2 and 4 that most firms tend to trade at.
- Cash generated from operations: $37 million
- Cash generated from operations per share: $0.14
Electronic Arts' management commentary on their 2nd quarter 2020 results
REDWOOD CITY, CA – October 29, 2019 – Electronic Arts Inc. (NASDAQ: EA) today announced preliminary financial results for its second fiscal quarter ended September 30, 2019. “It was an excellent second quarter for Electronic Arts. Our new EA SPORTS titles are thrilling core fans and bringing in new players, and our ongoing live services are growing with deeply engaged communities,” said CEO Andrew Wilson.
“With new games like Star Wars Jedi: Fallen Order, Need for Speed, Plants vs. Zombies and more great content across our top franchises, we’re set to deliver a lot of fun and excitement to players this holiday season, and continue our momentum in this fiscal year.” “The strong results this quarter illustrate the power of our live services and our core franchises. Strength in Ultimate Team, The Sims 4 and FIFA Online drove live services performance above our expectations,” said COO and CFO Blake Jorgensen. “Looking ahead, we are doubling down on live services combined with our core franchises. We’re investing in games that people play for longer and engage with much more deeply. This focus will continue to drive growth and profitability for the company through the remainder of this year and beyond.”
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Business Outlook as of October 29, 2019
he following forward-looking statements reflect expectations as of October 29, 2019. Electronic Arts assumes no obligation to update these statements. Results may be materially different and are affected by many factors detailed in this release and in EA’s annual and quarterly SEC filings.
Fiscal Year 2020 Expectations – Ending March 31, 2020 Financial metrics:
“With new games like Star Wars Jedi: Fallen Order, Need for Speed, Plants vs. Zombies and more great content across our top franchises, we’re set to deliver a lot of fun and excitement to players this holiday season, and continue our momentum in this fiscal year.” “The strong results this quarter illustrate the power of our live services and our core franchises. Strength in Ultimate Team, The Sims 4 and FIFA Online drove live services performance above our expectations,” said COO and CFO Blake Jorgensen. “Looking ahead, we are doubling down on live services combined with our core franchises. We’re investing in games that people play for longer and engage with much more deeply. This focus will continue to drive growth and profitability for the company through the remainder of this year and beyond.”
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Business Outlook as of October 29, 2019
he following forward-looking statements reflect expectations as of October 29, 2019. Electronic Arts assumes no obligation to update these statements. Results may be materially different and are affected by many factors detailed in this release and in EA’s annual and quarterly SEC filings.
Fiscal Year 2020 Expectations – Ending March 31, 2020 Financial metrics:
- Net revenue is expected to be approximately $5.410 billion.
- Change in deferred net revenue (online-enabled games) is expected to be approximately $(130) million.
- Mobile platform fees are expected to be approximately $(155) million.
- Net income is expected to be approximately $2.841 billion, approximately $1.705 billion of which is related to the one-time income tax benefits discussed above.
- Diluted earnings per share is expected to be approximately $9.57, approximately $5.74 of which is related to a one-time income tax benefit
- Operating cash flow is expected to be approximately $1.625 billion.
- The Company estimates a share count of 297 million for purposes of calculating fiscal year 2020 diluted earnings per share.
Electronic Arts (NASDAQ: EA) stock price history
The image below, obtained from Google, shows the stock price history of Electronic Arts over the last 5 years. And its been a very good time for Electronic Arts stockholders. 5 years ago the stock was trading at around $41 a stock and its currently trading at $94.41 a stock. That's a strong return of 130% provided by Electronic Arts stockholders over the last 5 years. The opportunity cost of holding Electronic Arts stock instead of say Netflix that returned over 300% over a 5 year period is significant though.
The stock of Electronic Arts is trading at a lot closer to its 52 week high of $108.80 than it is to its 52 week low of $73.91, which to us is a indication that the short term sentiment and momentum of Electronic Arts stock is positive at this point in time.
The stock of Electronic Arts is trading at a lot closer to its 52 week high of $108.80 than it is to its 52 week low of $73.91, which to us is a indication that the short term sentiment and momentum of Electronic Arts stock is positive at this point in time.
Recent coverage of Electronic Arts
The extract below discusses the latest news regarding Electronic ARts as obtained from TheStreet.com
Shares of video game maker Electronic Arts (EA - Get Report) are rising close to 5% after hours Tuesday after the company topped analysts second quarter revenue estimates. The Redwood City, CA-based company reported second quarter earnings of $2.89 per share on $1.28 billion in revenue. Shares were up 4.9% to $99 after-hours. Analysts were expecting the company to report earnings of 86 cents per share, though it is not clear if that metric matches what EA reported, on revenue of $1.25 billion.
The global gaming market is estimated to total about $135 billion, and while EA has struggled to find a new hit as growth has slowed, it is still one of the major players in a huge global market. For the rest of 2019, the company has two major titles slated for release, according to its own website: Need for Speed Heat, which is scheduled to release on Nov. 8, and Star Wars Jedi: Fallen Order, which is timed to release on Nov. 15, right in the middle of the Christmas shopping season
Read the full article here
Shares of video game maker Electronic Arts (EA - Get Report) are rising close to 5% after hours Tuesday after the company topped analysts second quarter revenue estimates. The Redwood City, CA-based company reported second quarter earnings of $2.89 per share on $1.28 billion in revenue. Shares were up 4.9% to $99 after-hours. Analysts were expecting the company to report earnings of 86 cents per share, though it is not clear if that metric matches what EA reported, on revenue of $1.25 billion.
The global gaming market is estimated to total about $135 billion, and while EA has struggled to find a new hit as growth has slowed, it is still one of the major players in a huge global market. For the rest of 2019, the company has two major titles slated for release, according to its own website: Need for Speed Heat, which is scheduled to release on Nov. 8, and Star Wars Jedi: Fallen Order, which is timed to release on Nov. 15, right in the middle of the Christmas shopping season
Read the full article here
Electronic Arts (NASDAQ: EA) latest stock valuation
So what is Electronic Arts stock worth based on the release of their latest earnings report and their guidance provided? Based on Electronic Arts latest earnings report and their guidance provided our valuation models provide a target (full value) price for the stock of Electronic Arts at $91.90 a stock and therefore believe the stock of Electronic Arts is slightly overvalued
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $91.90. Therefore we believe a good entry point into Electronic Arts stock is at $82.70 or below. We expect the stock of Electronic Arts to pull back slightly from current levels to levels closer to our target price (full value price) in coming weeks and moths as we believe it is overvalued at this point in time.
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $91.90. Therefore we believe a good entry point into Electronic Arts stock is at $82.70 or below. We expect the stock of Electronic Arts to pull back slightly from current levels to levels closer to our target price (full value price) in coming weeks and moths as we believe it is overvalued at this point in time.
Next earnings release date for Electronic Arts
It is expected that Electronic Arts 3rd quarter results of their 2020 fiscal year will be released in late January 2020 to early February 2020