Top video game stocks have underperformed this year, as growth has slowed while the economy reopens. But the stock of Electronic Arts (EA 0.08%) has outperformed its peers, which says a lot about the sales potential of its upcoming release schedule, coupled with EA's relatively low valuation.

EA Chart

EA data by YCharts.

EA beat its own guidance in revenue, bookings, and earnings per share for the fiscal first quarter, and management raised its full-year outlook. But the stock still fell after the earnings report and is currently down 5.1% year to date. 

The stock now sports a forward price-to-earnings multiple of 20.4 based on the consensus earnings estimate for fiscal 2022 (which ends in March). At these levels, EA is cheaper than Take-Two Interactive (TTWO 0.79%) and Activision Blizzard (ATVI).

Still, a low P/E alone doesn't make a stock a buy. The reason to invest in EA is its budding momentum on several fronts, including growth in EA Sports titles and prospects for big sales from upcoming releases, most importantly first-person shooter Battlefield 2042, which could be the biggest release yet in the series. 

A parent playing video games with a child.

Image source: Getty Images.

Major new releases coming

EA had a busy quarter, with the unveiling of Battlefield 2042 making quite a splash. Total views for trailers and content since the announcement on June 9 have reached over 210 million across all channels. The game will launch on Oct. 22 and should drive healthy sales for the holidays, especially since a new Battlefield isn't released every year like Activision's Call of Duty. The last Battlefield title release was nearly three years ago, so there could be pent-up demand.

EA also announced Madden NFL 22, to be released on Aug. 20, and FIFA 22, coming Oct. 1. Both titles will find an audience that is highly engaged with sports titles.

Over 140 million players have played an EA Sports title over the last 12 months. Specifically, EA said that Madden Ultimate Team had grown bookings 115% over the last two years. Likewise, FIFA Ultimate Team has seen a 47% increase in bookings.

These two-year growth comparisons are what put EA's trailing-12-month bookings growth of just 3% in context. What's notable is that EA's bookings are not dropping back to pre-pandemic levels, which would signify that new players were putting down their controllers to do something else with their time as the economy reopens. Instead, first-quarter 2022 bookings were down 4% year over year, which means consumer spending on EA's games is roughly the same as it was this time last year.

From a broader perspective, bookings are up 70% over the same quarter, ending in June 2019. EA also reported that mobile bookings, excluding the acquisition of Glu Mobile, are up 16% organically over the last two years. 

During the first-quarter earnings call, CEO Andrew Wilson seemed very encouraged by what he's seeing: 

Looking at our first quarter of fiscal 2022, we delivered very strong results. Even as the world took steps toward opening back up, we deepened engagement and connections for players in and around our games. And we see this trend going well into the future.

EA PE Ratio (Forward) Chart

EA P/E ratio (forward) data by YCharts.

A cheap stock with catalysts

The FIFA franchise of soccer games continues to grow around the world, with FIFA Online 4 in China reaching a new record for monthly, weekly, and peak daily active players. The release of F1 2021 from Codemasters positions EA well for growing interest in racing games, with sales up nearly 10% over last year's version. 

With momentum in sports, recent acquisitions that position EA for long-term growth in mobile, and a new Battlefield title on the horizon, this is shaping up to be a pivotal year for the company.

As the stock market reaches new highs and valuations for top growth stocks start to seem expensive, EA looks like a relatively good value at a forward P/E of 20.4, on top of a dividend yield of 0.50%. This is a great opportunity to buy shares before the market changes its mind.