Gamers are spending more time than ever in Electronic Arts games

electronic arts(EA 0.23% ) highly anticipated release in November of Battlefield 2042longtime competitor of ActivisionBlizzardit’s Call of Duty franchise, fell short of holiday sales expectations. But the outstanding performance of the rest of EA’s portfolio drove record revenue and profitability results in the third quarter of fiscal 2022.

The most impressive number from the revenue report is that gamers are spending nearly 20% more time in EA’s games in fiscal year 2022, which ends in March, than they have. made during the previous year, when the pandemic caused the demand for video games to explode. This trend could take the title to new heights this year.

Image source: Getty Images.

Growing faster than its peers

In November, EA said it had over 500 million unique player accounts in its games. In the latest earnings report, that number rose to 540 million. Actual monthly active users, which represent the most engaged gamers, were over 180 million during the quarter.

Monthly active users for Apex Legends grew more than 30% year-over-year, helping the popular esports title reach $1 billion in bookings for the full fiscal year.

It’s obvious that EA has a very strong momentum right now with its diverse portfolio ranging from best-selling sports titles to other favorites such as The Sims, Mountain peakand an expanding portfolio of mobile games with the acquisition of Glu Mobile last year for $2.1 billion.

In terms of growth, EA is starting to pick up the pace at the high end compared to its peers. Year-over-year, EA’s revenue grew 32% year-over-year to $6.5 billion, and management expects more growth over the course of the year. financial year 2023.

EA Revenue Table (TTM)

Data by YCharts.

The poor performance of Battlefield 2042 It was a bummer, but it was less than 10% of EA’s total revenue, and it’s expected to be less than 5% next year. And the title’s limited effect on EA’s record-breaking quarter validates management’s strategy of building a diverse portfolio of games across genres and platforms.

The title is ready for new heights

The stock’s valuation looks attractive after such an upbeat quarter and outlook for the year ahead. After bookings growth of 22% over the next 12 months, and with management expecting “strong growth” in fiscal 2023, the 24 multiple of share price to free cash flow is fair for a growing video game business and consistent with EA’s historical trading range.

Chart of EA Price to Free Cash Flow

Data by YCharts.

Growth of lucrative digital revenue streams, such as when gamers spend money to collect gamer cards in crazyUltimate Team functionality is fueling strong growth where it counts. Cash flow from operations increased 36% year over year in the quarter to $1.5 billion.

EA has many new releases planned to drive growth. She just signed a deal with waltz disneyof Lucasfilm to create new experiences in the star wars universe. It also has a mobile version of Apex Legends ongoing as well as unannounced projects at its top studios.

With improving cash flow, a regular quarterly dividend of $0.17 per share and plenty of growth opportunities ahead, Electronic Arts stocks would be a great addition to a diversified portfolio.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end consulting service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.

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