This Tech Giant Appears To Be A Better Pick Over Electronic Arts Stock

78 25/05/2022

We believe that Microsoft stock (NASDAQ: MSFT) currently appears to be an attractive pick over its industry peer Electronic Arts stock (NASDAQ: EA), despite its comparatively higher valuation. MSFT stock trades at 13.4x trailing revenues, compared to 5.7x for EA stock. Although both the companies saw a rise in revenue over the recent quarters, the growth has been better for Microsoft, aided by robust demand for its cloud offerings, including Azure.

Looking at stock returns, MSFT, with 7% returns over the last six months, has outperformed EA, which is down around 1%, and it has also outperformed the broader markets, with only a 3% rise for the S&P500 index. However, there is more to the comparison, and we believe that Microsoft stands out with higher expected returns compared to Electronic Arts, as we discuss in the sections below. We compare a slew of factors such as historical revenue growth, returns, and valuation multiple in an interactive dashboard analysis - Electronic Arts vs Microsoft: Which Stock Is A Better Bet? Parts of the analysis are summarized below.

1. Microsoft’s Revenue Growth Has Been Stronger

2. Microsoft Is More Profitable With Lower Risk

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3. The Net of It All

While MSFT stock may outperform EA, the Covid-19 crisis has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how counter-intuitive the stock valuation is for Cooper vs. Microsoft.

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