Investing

CEO's Electronic Arts Stake Shrinks by $2 Million

Trey Thoelcke

Published: February 27, 2024 9:45 am

Investors can learn a lot by observing the behavior of corporate insiders as they handle positions in their own companies. There are many reasons insiders may sell shares, such as buying a house, paying for college, or retirement planning. They generally buy shares for only one reason: they believe they will make more money.

Often, one of the largest and best-informed shareholders in any company is the chief executive officer. Let’s see whether Electronic Arts Inc. (NASDAQ: EA) CEO Andrew Wilson has been increasing or decreasing his share count over the past year and whether he knows something we don’t.

What You Need to Know About Electronic Arts

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Electronic Arts develops, markets, publishes, and distributes games, content, and services for game consoles, personal computers, mobile phones, and tablets worldwide. It develops and publishes games and services across various genres, such as sports, racing, first-person shooter, action, role-playing, and simulation, primarily under the Battlefield, The Sims, Apex Legends, Need for Speed, and it licenses games from others, including FIFA, Madden NFL, UFC, and Star Wars brands. The company licenses its games to third parties to distribute and host its games. It markets and sells its games and services through digital distribution and retail channels, as well as directly to mass market retailers, specialty stores, and distribution arrangements. (These are six reasons to avoid Best Buy today.)

Electronic Arts was incorporated in 1982 and is headquartered in Redwood City, California. That is also home to Box Inc. (NYSE: BOX), C3.ai Inc. (NYSE: AI), and Equinix Inc. (NASDAQ: EQIX). Among EA’s competitors are Roblox Corp. (NYSE: RBLX), Nintendo, Take-Two Interactive Software Inc. (NASDAQ: TTWO) and Ubisoft Entertainment. Wilson has been president and chief executive at EA since 2013. He is also chair of the board of directors.

The company posted annual revenue of nearly $7.6 billion and has a market capitalization near $38.1 billion. Shares recently hit a 52-week high of $144.53. The stock is up more than 4% year to date and nearly 30% higher than a year ago. The Nasdaq’s gain in the past year is almost 41%.

How Electronic Art’s CEO Is Trading

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One year ago, Wilson owned around 155,400 shares, worth nearly $18.0 million. On last look, he owed about 116,300 shares. Yet, despite reducing the stake by almost 40%, its value decreased only about 10.6% to around $16.1 million as the share price increased.

As mentioned, CEO Andrew Wilson might have sold shares for many reasons, and taking some cash when shares reach new highs certainly could be one of them. But is it fair to interpret that as a lack of confidence that the shares will keep climbing? The stock has been somewhat rangebound over the past couple of years. The dividend has been hiked only once since 2020. Yet, earnings were better than expected in the most recent quarterly report. And analysts on average recommend buying shares. The current consensus price target suggests there is a little more than 7% upside potential in the next 12 months.

Other insiders to watch include Chief Technology Officer Ken Moss. His stake was worth more than $34.7 million on last look, over twice that of Wilson. Director Jeffrey Huber has a stake worth almost $13.0 million. Note that two other officers recently sold some shares.