Can electronic arts reach a higher level in 2022?
IInvestors aren’t as excited about electronic arts‘ (NASDAQ:EA) stock today as they were in previous phases of the pandemic. The video game giant is still setting records for sales, cash flow and profitability, even as people prioritize other forms of entertainment in the wake of COVID-19 social distancing efforts.
Still, Wall Street is bracing for potentially bad news on these measures, especially given which rival ActivisionBlizzard (NASDAQ: ATVI) disclosed in its April 25 quarterly earnings announcement.
With that big picture in mind, let’s take a look at EA’s next earnings report, due May 10, and what it might show about the developer’s chances of beating the market in 2022.
Most investors following the stock expect EA to post a solid 19% sales increase to around $1.8 billion. But there’s a lot of noise in this revenue metric, which fluctuates due to the timing of major game releases.
A better trend to follow is engagement. EA noted last quarter that its pool of active players has grown to 180 million, and those users are spending 20% more time interacting with its games. Popular franchises like Fifa, madand Apex Legends all contributed to these victories.
Activision Blizzard recently announced that sales fell in the last quarter due to lower engagement compared to booming results a year ago when more people were looking for digital entertainment options. at home. The big question in EA’s report is whether the company sees the same pressures starting to impact its business.
The pipeline update
Activision also recently announced that it’s releasing two of its biggest content releases in the next fiscal year, adding pressure to its near-term sales outlook. So far, EA hasn’t announced any major delays, and most of its big launches this fiscal year have gone well.
The company closes fiscal 2022 this week, however, and will release its most detailed overview yet over the next few product launch quarters.
Ideally, EA can continue to release content at its current high pace so that engagement, audience size, and monetization rates continue to grow. A few delays, on the other hand, due to development bottlenecks, could convince investors to remain cautious about the stock.
Investors currently expect EA’s sales growth in fiscal year 2023 to slow, but remain positive, slowing to around 7% next year from 21% in fiscal year 2022. The short-term performance of the stock will depend on whether management confirms this objective or reinforces it. slightly, Tuesday.
EA’s broader image feedback will require it to consistently produce engaging content across new and established franchises. EA demonstrated this ability over the past few years when demand for digital entertainment exploded. Investors are poised to see if the company can extend this positive momentum in a weaker selling environment.
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Demitri Kalogeropoulos holds positions at Activision Blizzard. The Motley Fool fills positions and recommends Activision Blizzard. The Motley Fool recommends Electronic Arts. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.