Understanding Electronic Arts Risk Factors

California-based Electronic Arts (EA) makes video games accessible on consoles, smartphones and personal computers. His titles include Need of speed, Apex Legends, Battlefieldand EA SPORTSFIFA.

Reported revenue of $1.79 billion for the third quarter of fiscal 2022 ended Dec. 31 increased from $1.67 billion in the same quarter a year earlier. However, EPS of $0.23 was down from $0.72 in the prior year quarter.

Electronic Arts expects to distribute a quarterly cash dividend of $0.17 per share on March 23 and has set March 8 as the ex-dividend date.

With that in mind, we used TipRanks to look at additional risk factors for Electronic Arts.

Risk factors

According to the new TipRanks Risk Factors tool, Electronic Arts’ top risk category is technology and innovation, which contains 10 of the stock’s 29 identified risks. Finance and Corporate and Legal and Regulatory are the next two major risk categories, each with 4 risks. The company recently added a new risk factor and updated several previously highlighted risks.

In the newly added risk factor, which falls under the Production category, Electronic Arts informs investors about the difficult working environment in which it operates. She explains that her business depends on her ability to attract and retain qualified personnel for management, product development and marketing functions. The problem is that the market for highly skilled electronic arts workers is fiercely competitive. Additionally, the company has become a prime target for poaching talent, given its market leadership.

Electronic Arts warns that while it strives to provide a great work environment for its teams, it may still struggle to recruit and retain skilled workers. If it is unable to retain the right talent, the company warns that it could struggle to grow and run its business. In addition, its reputation may be tarnished.

In an updated risk factor, Electronic Arts reminds investors of the challenges in meeting the expectations of its customers, fans and regulators. For example, he says some of his games allow players to purchase digital items. This feature has caught the attention of the Electronic Arts community and may generate a negative perception regarding gameplay fairness.

The company warns that a negative perception of its in-game purchase feature could damage its reputation. Such adverse effects could also cause the company to delay the release of new products, which could lead to lost revenue. Additionally, Electronic Arts advises investors that its community-generated content may contain objectionable material, which could, in turn, expose the company to regulatory actions and lawsuits.

Electronic Arts’ stock has fallen about 3.4% over the past 12 months.

Analysts opinion

Barclays analyst Mario Lu recently maintained a Hold rating on Electronic Arts stock, but lowered the price target to $127 from $152. Lu’s new price target suggests downside potential of 6.47%.

The consensus among analysts is a strong buy based on 14 buys and 3 holds. The average Electronic Arts price target of $162.06 implies an upside potential of 19.35% from current levels.

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