Value
4.0/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 2.1 |
| P/S | 5.6 |
| EV/EBITDA | 0.0 |
| Fwd P/E | 6.1 |
| PEG | 5.9 |
| Analyst target | 3.0 |
- ▸Forward P/E: 21.2x
- ▸PEG: 1.27
EA · Why this verdict
Why Electronic Arts (EA) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictSELL
Overall score5.5/10
ConfidenceMEDIUM
MacroNEUTRAL
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
The business converts free cash flow at 250% of net income — meaning cash generation significantly exceeds reported earnings — supported by a wide economic moat, a Piotroski score of 8 out of 9, and a Rule of 40 score of 41, together indicating a durable, high-quality franchise. Quality breakdown | Free cash flow conversion remains above 150% of net income and the wide moat assessment is reaffirmed over the next four quarters, demonstrating that franchise quality is intact. | →Stable |
| CounterFree cash flow conversion materially above 100% of net income can be temporarily elevated by working capital or deferred revenue timing; if conversion normalizes toward 100% or below in subsequent quarters, the quality narrative loses its central supporting argument. | ||
The most recent quarter saw a 32% shortfall against earnings estimates — the largest in the four-quarter record — and two of the last four quarters have been misses, challenging the execution reliability premium embedded in the current valuation multiple. Earnings | Earnings per share beats estimates by more than 5% for 2 consecutive quarters, demonstrating that the recent large miss was an anomaly rather than a trend. | →Stable |
| CounterTwo beats in the last four quarters — including the oldest quarter with a 98% positive surprise — show the company can dramatically exceed estimates; if the recent large miss reflected a one-time factor rather than a structural guidance failure, a rebound beat could be equally sharp. | ||
The stock is currently trading above the analyst consensus price target, meaning the market has already priced in the consensus recovery scenario and the current setup offers no buffer to the downside on a risk/reward basis. Price targets | The stock pulls back to at least 5% below the analyst target, creating a re-entry opportunity with genuine upside to consensus. | →Stable |
| CounterHigh-quality businesses with wide moats can sustain prices above near-term analyst targets for extended periods as analyst estimates lag business momentum; if earnings power is being underestimated, the analyst target itself may reset higher rather than the stock reverting to it. | ||
A golden cross, RSI at 70, price near the 52-week high, and rising on-balance volume collectively signal strong price momentum — yet momentum at these extended levels following a large earnings miss creates the conditions for a near-term consolidation or pullback. Momentum breakdown | The stock sustains above its 50-day moving average and RSI holds above 55 for 8 consecutive weeks without a significant earnings-driven reversal, confirming the momentum is durable rather than overextended. | →Stable |
| CounterRSI at 70 combined with a golden cross and rising volume is characteristic of a confirmed uptrend rather than a topping pattern; in a high-quality franchise, continued momentum at these levels is statistically more likely than reversal. | ||
The business converts free cash flow at 250% of net income — meaning cash generation significantly exceeds reported earnings — supported by a wide economic moat, a Piotroski score of 8 out of 9, and a Rule of 40 score of 41, together indicating a durable, high-quality franchise.
→StableQuality breakdown
- Expectation
- Free cash flow conversion remains above 150% of net income and the wide moat assessment is reaffirmed over the next four quarters, demonstrating that franchise quality is intact.
CounterFree cash flow conversion materially above 100% of net income can be temporarily elevated by working capital or deferred revenue timing; if conversion normalizes toward 100% or below in subsequent quarters, the quality narrative loses its central supporting argument.
The most recent quarter saw a 32% shortfall against earnings estimates — the largest in the four-quarter record — and two of the last four quarters have been misses, challenging the execution reliability premium embedded in the current valuation multiple.
→StableEarnings
- Expectation
- Earnings per share beats estimates by more than 5% for 2 consecutive quarters, demonstrating that the recent large miss was an anomaly rather than a trend.
CounterTwo beats in the last four quarters — including the oldest quarter with a 98% positive surprise — show the company can dramatically exceed estimates; if the recent large miss reflected a one-time factor rather than a structural guidance failure, a rebound beat could be equally sharp.
The stock is currently trading above the analyst consensus price target, meaning the market has already priced in the consensus recovery scenario and the current setup offers no buffer to the downside on a risk/reward basis.
→StablePrice targets
- Expectation
- The stock pulls back to at least 5% below the analyst target, creating a re-entry opportunity with genuine upside to consensus.
CounterHigh-quality businesses with wide moats can sustain prices above near-term analyst targets for extended periods as analyst estimates lag business momentum; if earnings power is being underestimated, the analyst target itself may reset higher rather than the stock reverting to it.
A golden cross, RSI at 70, price near the 52-week high, and rising on-balance volume collectively signal strong price momentum — yet momentum at these extended levels following a large earnings miss creates the conditions for a near-term consolidation or pullback.
→StableMomentum breakdown
- Expectation
- The stock sustains above its 50-day moving average and RSI holds above 55 for 8 consecutive weeks without a significant earnings-driven reversal, confirming the momentum is durable rather than overextended.
CounterRSI at 70 combined with a golden cross and rising volume is characteristic of a confirmed uptrend rather than a topping pattern; in a high-quality franchise, continued momentum at these levels is statistically more likely than reversal.
TrendMatrix Research · core thesis
Engine thesis — one sentence
Electronic Arts operates a high-quality franchise with 250% free cash flow conversion and a wide economic moat, but the stock is now trading above the analyst price target and the most recent quarter logged a 32% earnings miss — leaving the near-term risk/reward unfavorable and the setup suggesting patience is warranted before adding exposure.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Per-dimension breakdown
Quality
7.2/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 4.5 |
| ROA | 3.8 |
| Gross margin | 10.0 |
| Op margin | 9.6 |
| Net margin | 5.9 |
| Current ratio | 4.1 |
| FCF quality | 10.0 |
| Moat | 8.4 |
| Rule of 40 | 7.2 |
| Piotroski F | 8.9 |
- ▸Excellent cash conversion: 250% FCF/NI
- ▸Wide economic moat
- ▸Compounder quality: strong returns + growth
- ▸Rule of 40: 41 (pass)
Growth
7.8/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 5.5 |
| EPS growth | 10.0 |
Momentum
5.6/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 4.5 |
| MACD | 10.0 |
| OBV | 1.0 |
| MA position | 9.0 |
| Volume | 3.7 |
- ▸Overbought (RSI 70)
- ▸Volume distribution (falling OBV)
- ▸Above 200-day MA
Sentiment
4.7/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 5.0 |
| Price target | 5.0 |
| erm sentiment | 4.0 |
Insider
5.0/10data confidence 50%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 5.1 |
- ▸Insider selling (low materiality) — $8,662,567 (0.017% of mkt cap)
Peer rank
2.7/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 1.4 |
| quality rank | 5.1 |
| growth rank | 4.3 |
Technical
4.4/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 1.4 |
| support resistance | 1.9 |
| 52w position | 9.9 |
Risk (lower is worse)
6.8/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 7.7 |
| days to cover | 4.8 |
| volatility | 10.0 |
| put call | 0.0 |
| implied vol | 6.8 |
| beta | 9.2 |
| debt equity | 8.9 |
- ▸Elevated put/call: 6.88
Catalyst
5.6/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 3.5 |
| earnings history | 6.7 |
| earnings timing | 5.0 |
| surprise avg | 7.7 |
| dividend safety | 5.2 |
- ▸Strong earnings: 3B/1M
- ▸Dividend: 37.0%
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (7)
- MOMENTUM:5.6>=5.5
- INSIDER:OK
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:25d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:-0.8=NEGATIVE
Warning (0)
none
Reward-to-Risk
-0.85
Upside
-12.7%
Downside
15.0%
Sizing output
AVOID
Setup— — No clear chart pattern; technical signals are mixed
EdgeCatalyst-Driven — Earnings in 25d with 3/4 beat streak
SuitabilityModerate — Balanced profile
Investment implication
The F-path SELL output reflects an overall score of 5.5 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Growth at 7.8) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( ASYMMETRY:-0.8=NEGATIVE) reinforce the read. Current asymmetry R:R is -0.85 — supplementary context, not the trigger for this path.
The strongest dimensions are Growth at 7.8, Quality at 7.2, and Risk (lower is worse) at 6.8; the weakest are Peer rank at 2.7, Value at 4.0, and Technical at 4.4. The V9 engine flagged 1 failed gate, producing an asymmetric reward-to-risk of -0.85 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1High Quality Cash Conversion
Trip ifFree cash flow conversion falls below 100% of net income for 2 consecutive quarters.
- P2Earnings Execution Gap
Trip ifEPS surprise exceeds 5% for 2 consecutive quarters.
- P3Price Above Analyst Target
Trip ifStock pulls back below $185, approximately 9% below the current price of $203.
- P4Overbought Momentum At Risk
Trip ifRSI falls below 50 and the stock closes below the 200-day moving average for 3 consecutive weeks.