Have EA Shares Run Too Far After a 40% Surge in 2024?

• If you are wondering whether Electronic Arts at around $203 a share is still a smart buy or if the easy gains are behind it, this article walks through exactly what the current price might be baking in.
• The stock has slipped about 0.2% over the past week and is roughly flat over the last month, but it is still up about 39.7% year to date and 39.0% over the past year, hinting that sentiment has shifted meaningfully in its favor.
• That momentum has been underpinned by a steady pipeline of major franchise releases and expansions, plus ongoing investor enthusiasm around live services and sports titles that keep players, and their spending, engaged for years. At the same time, broader interest in large, established gaming platforms has grown as the market looks for durable cash generators rather than speculative growth stories.
• Despite this backdrop, Electronic Arts only scores a 1 out of 6 on our valuation checks, suggesting the market may already be pricing in a lot of good news, or that traditional metrics are missing something about the business. Next, we will unpack those valuation methods in detail, and then circle back to a more complete way of thinking about EA's real worth beyond just the headline multiples.

Electronic Arts scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Electronic Arts Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a business is worth by projecting the cash it can generate in the future and discounting those cash flows back to today in $ terms.

For Electronic Arts, the 2 Stage Free Cash Flow to Equity model starts with last twelve month free cash flow of about $1.67 billion, then layers on analyst forecasts and longer term extrapolations from Simply Wall St. Analyst estimates in the source material see free cash flow rising into the low $2 billion range by the late 2020s, with projected free cash flow of roughly $2.54 billion by 2030 as the company grows its franchise pipeline and live service revenues.

When all these future $ cash flows are discounted back, the model arrives at an intrinsic value of about $150.80 per share. With the stock trading around $203, the DCF implies the shares are roughly 35.1% above this estimated fair value.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Electronic Arts may be overvalued by 35.1%. Discover 900 undervalued stocks or create your own screener to find better value opportunities.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Electronic Arts.

Approach 2: Electronic Arts Price vs Earnings

For profitable, relatively mature businesses like Electronic Arts, the price to earnings ratio is often the most intuitive way to think about valuation, because it links the share price directly to the profits each share is generating today.

In general, higher expected growth and lower perceived risk can justify a higher “normal” PE ratio, while slower growth, cyclical earnings or greater uncertainty usually pull a fair multiple down. Electronic Arts currently trades on about 57.4x earnings, which is well above the broader Entertainment industry average of roughly 20.9x, but below the peer group average near 71.0x. That comparison alone might make EA look expensive versus the sector, but not extreme against its closest competitors.

Simply Wall St’s Fair Ratio framework goes a step further by estimating what PE multiple Electronic Arts should trade on, given its specific mix of earnings growth, profitability, industry, market value and risk profile. For EA, that Fair Ratio is about 25.7x, which is meaningfully below the current 57.4x multiple. Because this approach adjusts for EA’s own fundamentals rather than just comparing it with sometimes flawed peer or industry groupings, it provides a cleaner signal that, on earnings, the shares look richly priced.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1458 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Electronic Arts Narrative

Earlier we mentioned that there is an even better way to understand valuation. Let us introduce you to Narratives, a simple tool on Simply Wall St's Community page. With Narratives, you connect your view of Electronic Arts' future revenue, earnings and margins to a financial forecast and a fair value estimate. You can then compare that fair value with today’s price to decide whether to buy, hold or sell. The platform keeps your Narrative updated automatically as new news or earnings arrive. For example, one investor might build a bullish EA Narrative anchored around strong live services growth, expanding margins to around 19 percent and a fair value close to the proposed 210 dollars take private price. Another investor might take a more cautious view, assuming slower growth nearer 5 percent, lower earnings and a fair value closer to 148 dollars. Both perspectives are clearly expressed as stories tied directly to numbers rather than vague opinions.

Do you think there's more to the story for Electronic Arts? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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