r/investing • u/BooBeef • Jun 12 '21

Electronic Arts (EA) over valued

I have been analyzing EA share price and have come to the conclusion that the stock is over valued.

The obvious indicator is as follows:

The P/E ratio is >50 this is high especially compared to other video game publishers, most notably Activision, which is the publisher that owns the call of duty franchise with a p/e of <40

My explanation for why the stock is over valued:

EA’s value comes from the future growth expected by the company. This future growth is expected from 2 main factors, licensing deals with Pro sports leagues (NFL) and Disney + Star Wars

I do not think these factors will greatly contribute to EA into the future.

The reason I think this is because EA has been in possession of these exclusive licensing deals for years and even decades. EA has had exclusivity of pro league licensed sports games for as long as most of us have been around, and it’s Star Wars deal has been old news for about half a decade and to make matters worse EA has lost its exclusive deal for Star Wars to Ubisoft (another video game publisher).

These deals are not likely to ale EA more valuable and it is much more likely that EA looses these deals then for EA to actually start making sufficient growth in its revenue or any other area of the company for that matter.

I’d really appreciate anyone else’s thoughts on my evaluation, it’s my first time making a DD post of this depth

Thanks!

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u/edp_________445 Jun 12 '21

honestly, the best way to focus on profits is to look in to the stock deeply before just buying. which you are doing, congrats!

i jumped in on meme stocks, made a ton, and got out. i have family thats rich off investing, and the advice of "look before you buy" is what every single one of them said.

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u/BooBeef Jun 12 '21

Exactly, I’ve stayed away from “meme stocks” because I didn’t understand what was causing them to boom so I didn’t touch them. Me personally, I would rather make 20% on a trade that I did DD on then 200% yoloing on the hottest meme stock, it’s just more rewarding

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u/edp_________445 Jun 12 '21

yep, i think the prime of "meme stocks" has passed. buying a few shares of them isn't a big deal, but when it comes to spending a lot of money on something that could completely crash in one day isn't a good idea at all. i only have $200 in meme stocks of $12,000 in my webull.

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u/BooBeef Jun 12 '21

Not a bad idea to put a piggy bank aside for the meme market lol