What to expect from Electronic Arts’ first quarter of fiscal 22?
Electronic Arts (NASDAQ: EA) is expected to release its fiscal year 2022 fiscal results on Wednesday, August 4. We expect the company to likely post revenues and earnings above consensus estimates. Electronic Arts, in line with other gaming companies, is expected to benefit from the higher levels of gaming engagement seen in recent quarters, bolstering overall revenue growth. Additionally, our forecast indicates that Electronic Arts’ valuation is $ 170 per share, which is 18% above the current market price of around $ 144, implying that the EA share has more margin of growth, in our opinion. Our interactive dashboard analysis on Pre-earnings in electronic arts has additional details.
(1) Expected revenue higher than consensus estimates
Trefis estimates Electronic Arts revenue in the first quarter of 2022 at around $ 1.35 billion, slightly above the consensus estimate of $ 1.28 billion. Despite opening up economies with ongoing vaccination programs in several countries, user engagement levels for games have so far remained higher. In addition, the company made multiple acquisitions over the past fiscal year, including those of Codemasters and Glu, which will strengthen overall revenue growth. Electronic Arts’ total bookings for the fourth quarter of 2021 (refer to revenue plus the change in deferred revenue) increased 19% year-over-year to $ 1.5 billion, primarily reflecting continued growth in its franchises of electronic sports. Our dashboard on Electronic arts revenue offers more details on the business segments.
2) EPS likely to be higher than consensus estimates
Electronic Arts’ adjusted earnings per share in the first quarter of 2022 is expected to be $ 0.75 per Trefis analysis, well above the consensus estimate of $ 0.62. The company’s adjusted net income of $ 358 million in the fourth quarter of fiscal 2021 reflects a 14% increase from its figure of $ 314 million in the previous year quarter. For fiscal 2022, we expect adjusted EPS to be higher at $ 6.81 compared to $ 5.75 for fiscal 2021.
(3) Estimate of the share price 18% above the current market price
Through our Electronic Arts Assessment, with an EPS estimate of $ 6.81 and a P / E multiple of 25x in 2022, that translates to a price of $ 170, which is 18% above the current market price of around $ 144. In fact, at the current market price of $ 144, the EA stock is trading at 21 times its 2022 EPS estimate of $ 6.81, compared to a P / E multiple of 37 times for its Take Two Interactive counterpart.
Note: P / E multiples are based on the stock price at the end of the year and reported (or expected) adjusted earnings for the entire year.
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