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RISK CONCERN
Investment Strategy, Risk Analysis, and Insights by Chartered Professionals
Electronic Arts Inc. (XNAS:EA) In-Depth Stock/Fundamental/Options Analysis Today
Primary Facts
EA
Name:
ELECTRONIC ARTS INC. (XNAS:EA)
Sector:
- 187000.00K
Industry:
Electronic Gaming & Multimedia
CEO:
Mr. Andrew Wilson
Total Employees:
12,900
Our Technological Advancement Rating
Our Rating:
A+
Technological advancement compared to industry is 1413.08% higher
ANALYSIS OF ALL CRITICAL FACTORS & RISKS RELATED TO THE STOCK & FUNDAMENTAL/LONG-TERM ANALYSIS OF ELECTRONIC ARTS INC.(EA) AS PER DATA ANALYSIS OF LAST 3 YEARS AND COMPARISON WITH COMPETITORS/PEERS, AND ELECTRONIC GAMING & MULTIMEDIA INDUSTRY. DATE: 07/09/2022
Primary Targets/Price Insights
Previous Close ($) :
125.33
One Month Price Target:
$125.92
Six Month Price Target :
$128.87
Likely Price in One Year's Time:
Ticker:
$132.41
Likely Trading Range Today Under (Normal Volatility)
$124.98
Price Upper limit ($) :
$125.79
Price Lower limit ($) :
Crash Risk Prep/Key Price Levels (High Volatility/Risk)
Price, as per data analysis, isn't likely to fall below:
Today:
$120.5
This week:
$114.54
This month :
$103.75
Other Primary facts
Market Cap:
34.68B
Market Cap Classification:
Large Cap
Number of Shares
IPO Date:
278.05M
Best/Worst Daily Performance (Last 3+ Years)
Highest Daily Appreciation:
10.66%
-8.64%
Worst Daily Decline:
Our Options Trading Entry Points
Iron Condor entry points for options expiring in 1 week's time
Low risk (<2%) entry points
Buy Call:
Sell Call:
Buy Put:
Sell Put:
$147.72
$137.41
$102.94
$113.25
Medium risk (<10%) entry points
Buy Call
Sell Call
$134.05
Buy Put:
Sell Put:
$131.85
$116.58
$118.81
These entry points can be used for other strategies, such as butterflies, straddles, etc.
Risk-Adjusted returns (Sharpe Ratio) of
EA
Sharpe Ratio:
1.97%
Comparison:
EA, is amongst the top 40% stocks with highest risk-adjusted returns
Sharpe ratio is -21.36% lower than the industry
& is -13.49% lower than the market/S&P 500 average
Average Returns/Yield of
EA
Daily returns:
0.05%
Weekly returns:
0.23%
Monthly returns:
0.93%
Yearly returns:
21.16%
Comparison of returns:
Average annual returns/yield (last 3 years) is -47.52% below industry average
Classification:
EA, is amongst the top 60% highest yielding stocks in terms of daily returns
Results of T-Test of Returns:
0.89
Statistical test of Returns:
EA has not yielded statistically significant higher returns when compared to the market
Volatility (measured by Standard Deviation)
Daily Volatility:
1.90%
Weekly Volatility:
4.24%
Monthly Volatility:
8.48%
Yearly Volatility:
29.39%
Volitlilty of last five days (Measured by Standard Deviation)
Average Volatility of this Week:
1.53%
Volatility in last five trading days has been -19.46% below long-term volatility
Value at Risk Analysis (VaR)
Daily VaR:
-3.85%
Weekly VaR:
-8.61%
Monthly VaR:
-17.22%
How Much Can the price of
EA
Decline in a Recession?
Likely price decline in a recession:
Base case (decline):
-15%
Worst case (decline):
-59.64%
This translates to price declining to:
$106.91
This translates to price declining to:
$50.58
Severe Crash Probability
Risk of crash in next 6/12 months: Medium (<50%)
What is Value at Risk (VaR)?
Risk Fundamentals
EA is a 21.52% riskier investment compared to the market/S&P 500 & is 4.11% riskier than Nasdaq (IXIC)
Risk (measured by volatility) is -33.10% below industry average
Overall, it is amongst the top 50% most risky stocks
Beta Examination of
EA
Beta in relation to market/S&P 500--0.84
Expected beta in 1 year's time:
0.671
Expected beta in 3 year's time:
0.95
Unlevered (debt free) Beta:
0.714
Beta in relation to Nasdaq (XNAS):
0.557
Beta in relation to all global stocks::
0.395
Beta Comparison & Analysis
Beta of competitors/peers::
0.921
Beta is -8.74% lower than peers
Average Industry Beta:
0.604
Beta is 39.22% above industry average
Sustainable Growth Rate Analysis
Sustainable growth rate for this stock/firm:
5.77%
Sustainable growth rate is -57.05% below industry average
Alpha provided | Alpha Analysis
Alpha provided:
0.022
Alpha is -84.19% below industry average alpha yield
Alpha is 140% higher than market/& is unsustainably high
Analysis of Cost of Capital of
EA
Equity cost of capital:
0.089
Equity cost of capital is 22.27% above industry mean WACC
Unlevered (without debt) cost of capital:
7.57%
Before-tax cost of debt:
0.82%
After-tax cost of debt:
0.65%
Overall debt rating:
Highest AAA investment grade
Weighted average cost of capital (WACC):
0.65%
WACC is 33.99% above industry mean WACC
Key Per-Share Metrics & Analysis
Revenue per share:
$25.14
Revenue growth rate per share of (3Y):
4.51
Annual revenue growth rate is -68.59% below industry average
EPS:
$2.76
Expected Annual growth rate of EPS (3Y):
-12.90%
Expected future EPS growth rate is -157.28% lower than the Electronic Gaming & Multimedia industry
Free cash flow (FCF) per share:
$6.04
-
-
Debt per share
$6.75
EBITDA per share
$5.69
Valuation Analysis Today of
EA
P/E Ratio:
39.72
P/E Ratio of Competitors/Peers:
44.34
P/E ratio is -10.40% lower than main peers & is 19.57% higher than the industry
Stock price/value with industry average P/E ratio: $91.69
EA is 36.68% overvalued if valued using industry average P/E ratio
Share value as per dividend discount (DDM) model: $25.38
Present value of the expected future dividends only: $10.27
P/S (Price to Sales ratio):
4.98
Price to sales ratio is 25.36% above the industry mean
P/B (Price to book value ratio):
4.51
Price to free cash flow: 20.77
Price to free cash flow ratio is -9.94% lower than the industry
Net income growth rate (3Y):
-14.47%
Net income growth rate is -64.47% lower than the industry average net income growth rate
Dividend Analysis
Dividend payout rate: 6.21%
Dividend yeild: 0.56%
Previous Dividend: $0.19
Previous adjusted dividend: $0.19
Previous Dividend: $0.70
Expected next dividend best case: $0.20
Expected next dividend worst case: $0.18
Average dividend payment (long-term): $0.17
Average dividend increase/decrease (growth rate) % per period: 1.96%
Expected next dividend payment date: 20/09/2022
Expected next dividend record date: 09/06/2022
-
Previous dividend payment date: 22/06/2022
Previous dividend record date: 06/08/2022
-
Dividend History:
2022-06-07--$0.19
2021-12-07--$0.17
2021-06-01--$0.17
2022-03-08--$0.17
2021-08-31--$0.17
2021-03-02--$0.17
Dividend growth rate is -87.70% lower than the industry average
In-depth Debt & Leverage Analysis
Debt to equity ratio:
24.29%
Net debt to equity ratio:
-11.45%
Debt to assets ratio:
14.74%
Net debt to assets ratio:
-6.95%
Debt-to-asset ratio is -64.86% below industry average
Ability to repay debt:
Interest coverage ratio:
98.94
Interest coverage ratio is -9.70% less than industry average
Looking forward:
Debt growth rate:
83.29%
Annual debt growth is 943% higher than industry average debt growth rate
Debt repayment rate in last quarter: 0.00%
Analysis of Key Statistics
Correlation of price movement with the market:
0.473
Statistical significance of correlation:
EA has a statistically significant correlation with the market
Average Correlation of the industry with the market:
0.384
Stock price is 23.30% more correlated with the market, compared to the industry average correlation
R Squared (percentage of price movement explained by movement of the market):
0.384
Correlation of price movement with Nasdaq (^IXIC):
-0.028
Covariance of price movement with the market:
-0.031
Kurtosis
4.273
Returns have moderate fat-tails (leptokurtic), i.e., returns considerably higher or lower than the mean returns are more probable, compared to assets with normally distributed returns
Skewness of returns:
0.041
Returns are, approximately, symmetrical
Fundamental Analysis & Dupont Analysis of
EA
Gross Profit Margin Ratio:
294%
Operating Profit Margin Ratio:
16.15%
Operating profit margin is -318.68% lower than the industry
Net Profit Margin Ratio:
294%
Effective Tax Rate:
27.01%
Effective tax rate is 106.47% higher than the industry
Dupont Method
Net Profit Margin
Return on Equity Ratio (ROE):
×
ROA
=
×
10.21%
Return on equity (ROE) is 4396.41% higher than the industry
Financial Leverage
Asset Turnover Ratio (ROA):
6.20%
Return on assets (ROA) is -227.30% lower than the industry
Financial Leverage:
1.2x
Current Ratio:
1.89
Current ratio is -54.88% below industry average
Cash Conversion Cycle (days):
36.2
Cash conversion cycle is -52.10% below industry average
The remaining useful life of property plant & equipment is: 2.3 years
Stock based compensation to net income ratio:
15.84%
In-depth Efficiency Analysis
Revenue generated per employee:
541.9K
Each employee generates -20% less revenue than industry average revenue per employee
EBITDA generated per employee:
122.7K
Each employee generates -5% less EBITDA than industry average revenue per employee
Profit generated per employee:
61.2K
Each employee generates -7% less net income/profit than industry average revenue per employee
Free cash flow (FCF) generated per employee:
- 14.5K
Each employee generates -302% less free cash flow than industry average revenue per employee
Assets/Capital per employee
624.6K
Each employee generates -302% less free cash flow than industry average revenue per employee
Research & Development (R&D) Analysis
Research & development (R&D) investment growth rate-- 14.05%
Growth rate in R&D investment/expenditure is 221.85% higher than the industry
Competitors/Peer firms of
EA
MATCH GROUP, INC. (XNAS:MTCH)
VODAFONE GROUP PUBLIC LIMITED COMPANY (XNAS:VOD)
LIBERTY BROADBAND CORPORATION (XNAS:LBRDK)
SIRIUS XM HOLDINGS INC. (XNAS:SIRI)
ACTIVISION BLIZZARD, INC. (XNAS:ATVI)
ROKU, INC. (XNAS:ROKU)
ZOOM VIDEO COMMUNICATIONS, INC. (XNAS:ZM)
PARAMOUNT GLOBAL (XNAS:PARAA)
PARAMOUNT GLOBAL (XNAS:PARA)
Current Analyst Ratings
Strong buy�33%
Buy�58%
Hold�21%
Sell�0%
Strong sell�0%
Overall analyst sentiment is: Buy
Income Statement
Period:
TTM
Date:
3/31/22
Revenue:
6.99B
Cost of Revenue:
Gross Profit:
R&D Expense
General & Admin Expenses:
Selling, General & Admin Expenses
Sales and Marketing Expenses
Other Expenses :
Operating Expenses :
Cost & Expenses :
Interest Income:
Interest Expenses:
Depreciation & Amortization:
EBITDA:
Operating Income:
Other Income Expenses:
Income Before Tax:
Income Tax Expense:
Net Income:
Balance Sheet
Date:
Calendar Year:
Period:
Cash & Cash Equivalents:
Short Term Investments:
Cash & Short Term Investments:
Net Receivables:
Inventory:
Other Current Assets:
Total Current Assets:
PP&E:
Goodwill:
Intangible Assets:
Long Term Investments:
Tax Assets:
Other Non-Current Assets:
Total Non-Current Assets:
Other Assets:
Total Assets:
Accounts Payable:
Short Term Debt:
Tax Payables:
Deferred Revenue:
Other Current Liabilities:
Total Current Liabilities:
Long Term Debt:
Other Non-Current Liabilities:
Total Non Current Liabilities:
Other Liabilities:
Total Liabilities:
Common Stock:
Retained Earnings:
Accumulated Other Comprehensive Loss:
Other Total Stockholders' Equity:
Total Stockholders' Equity:
Total Liabilities and Stockholders' Equity:
Total Investments:
Total Debt:
Net Debt:
1.86B
5.13B
2.19B
673.00M
1.63B
961.00M
183.00M
4.00B
-
16.00M
486.00M
1.58B
1.13B
789.00M
1.08B
292.00M
789.00M
Statement of Cash Flow
Date:
Period:
105.00M
Differed Income Tax :
-
Stock Based Compensation :
125.00M
Change in Working Capital :
- 577000.00K
Accounts Receivables:
-
Other Working Capital:
- 194000.00K
Other Non-Cash Items:
-
Net Cash Provided by Operating Activities:
- 143000.00K
Investments in PP&E:
-
Net Acquisitions:
- 1989000.00K
Purchases of Investments:
- 285000.00K
Sales/Maturities of Investments:
Other Investing Activities:
Net Cash Used for Investing Activities:
Debt Repayment:
Common Stock Issued:
Common Stock Repurchased:
Dividend Paid:
Other Financing Activities:
Net Cash Used Provided by Financing Activities:
Effect of FOREX on Changes in Cash:
Net Changes in Cash:
Cash at End of Period:
Cash at Beginning of Period:
Operating Cash Flow:
Capital Expenditure:
Free Cash Flow (FCF):
6/30/21
2022
Q1
2.84B
881.00M
3.72B
557.00M
-
401.00M
4.68B
510.00M
4.26B
909.00M
-
1.96B
422.00M
8.06B
-
12.73B
73.00M
76.00M
-
1.42B
904.00M
2.47B
1.88B
634.00M
2.54B
-
5.01B
3.00M
7.76B
- 35000.0K
-
June 30, 2021 at 6:00:00 AM
5.86B
7.73B
12.73B
-
1.95B
- 885000.0K
507.00M
- 44000.00K
- 1811000.00K
-
-
- 325000.00K
- 49000.00K
- 105000.00K
- 479000.00K
11.00M
- 2422000.00K
2.84B
5.26B
- 143000.00K
- 44000.00K
- 187000.00K
Our Proprietary Portfolio Rating
Our Rating:
A+
Price Forecast/Expected Price in Next 5 Years of
EA
2023
2024
2025
2026
2027
$133.27
$140.80
$148.76
$157.16
$166.04