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Electronic Arts (EA) Stock Sinks As Market Gains: What You Should Know

Zacks Equity Research
·3 min read

Electronic Arts (EA) closed at $126.77 in the latest trading session, marking a -0.12% move from the prior day. This change lagged the S&P 500's 0.35% gain on the day. Elsewhere, the Dow lost 0.1%, while the tech-heavy Nasdaq added 0.37%.

Prior to today's trading, shares of the video game maker had lost 1.86% over the past month. This has lagged the Consumer Discretionary sector's gain of 1.42% and the S&P 500's gain of 4.32% in that time.

EA will be looking to display strength as it nears its next earnings release, which is expected to be November 5, 2020. On that day, EA is projected to report earnings of $0.01 per share, which would represent a year-over-year decline of 98.96%. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $952.28 million, down 25.43% from the year-ago period.

EA's full-year Zacks Consensus Estimates are calling for earnings of $5.54 per share and revenue of $6 billion. These results would represent year-over-year changes of -3.15% and +15.17%, respectively.

Any recent changes to analyst estimates for EA should also be noted by investors. Recent revisions tend to reflect the latest near-term business trends. With this in mind, we can consider positive estimate revisions a sign of optimism about the company's business outlook.

Our research shows that these estimate changes are directly correlated with near-term stock prices. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. The Zacks Consensus EPS estimate has moved 1.67% higher within the past month. EA is currently a Zacks Rank #2 (Buy).

In terms of valuation, EA is currently trading at a Forward P/E ratio of 22.92. This valuation marks a discount compared to its industry's average Forward P/E of 23.83.

Investors should also note that EA has a PEG ratio of 1.85 right now. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. EA's industry had an average PEG ratio of 2.1 as of yesterday's close.

The Toys - Games - Hobbies industry is part of the Consumer Discretionary sector. This industry currently has a Zacks Industry Rank of 67, which puts it in the top 27% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our individual industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

Make sure to utilize Zacks. Com to follow all of these stock-moving metrics, and more, in the coming trading sessions.


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