Electronic Arts Inc.

EA Details

Announced Sims Sessions: Electronic Arts Inc. (NASDAQ: EA) is a digital interactive entertainment that develops and delivers games, content and online services for Internet-connected consoles, mobile devices and personal computers. Some of the company’s trademark games include Maxis, The Sims, EA SPORTS, Electronic Arts, Battlefield, Need for Speed, Apex Legends. The company recently notified about Sims Sessions, which is an in-game music festival taking place in life simulation game, The Sims™ 4.  Since 2004, Sims has partnered with around 500 artists to record songs in the iconic language of Simlish for millions of Sims players around the world. 

FY21 Result Highlights: For the year ended 31 March 2021 (FY21), the company reported total revenue of $5,629 million, up from $5,537 million in FY20. During the year, the company delivered 13 new games and had more than 42 million new players joined its network. Net income for FY21 stood at $837 million.

Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks: The company is exposed to competition risk as there is intense competition in the interactive entertainment industry. The company is also exposed to the risks related to fluctuations in the foreign currency exchange rates.

Outlook: For the quarter ending 30 June 2021, the company expects its revenue and net income to be around $1.475 billion and $70 million, respectively. For the full year FY22, the company expects its revenue to be around $6.8 billion. Net income in FY22 is expected to be around $390 million.

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: Over the last three months, the stock has provided a return of 3.02% and is trading higher than the average 52-week price level band of $150.30 - $110.15. On the technical analysis front, the stock has a support level of $139.63 and resistance of $146.34. We have valued the stock using the P/E multiple based illustrative relative valuation method and arrived at a target price with an upside of higher single-digit (in % terms). We believe that the company can trade at a slight discount to its peers, considering the decline in net income, rise in debt to equity ratio and also taking into the company has been trading at a discount in the past 3-years over its peer median. We have taken peers like Activision Blizzard Inc (NASDAQ: ATVI), NetEase Inc (NASDAQ: NTES), Take-Two Interactive Software Inc (NASDAQ: TTWO). Considering the rise in FY21 revenue and operating cashflow, new games delivered in FY21, rise in new players, and valuation, we give a “Hold’ rating on the stock at the closing price of 142.14, down by ~1.17% as on 1 July 2021.

EA Daily Technical Chart, Data Source: REFINITIV

FMC Corporation 

FMC Details

Received U.S. EPA Registration for Fluindapyr: FMC Corporation (NYSE: FMC) is an agricultural sciences company that provides innovative solutions to farmers around the world. The company recently received registration from U.S. Environmental Protection Agency (EPA) for its novel broad-spectrum succinate dehydrogenase inhibitor, fluindapyr, that provides protection against a variety of destructive diseases. FMC plans to bring high-performance fluindapyr premixture products to the markets to provide flexible and versatile resistance management.

Q1FY21 Result Highlights: For Q1FY21, the company reported total revenue of $1.2 billion, down by 4% on pcp. However, in Asia, the revenue grew by driven by strong demand for the recently launched Overwatch® herbicide and diamide demand across the region.  EBITDA for Q1FY21 stood at $307 million, down by 14% on pcp, impacted by cost increases on raw materials and higher R&D spending, as well as volume declines in Latin America and EMEA.  Consolidated GAAP earnings for Q1FY21 stood at $1.40 per diluted share, down 11% on pcp. Net income for Q1FY21 stood at $183 million.

Net Income Trend (Source: Analysis by Kalkine Group)

Key Risks: The company is exposed to the risks related to the potential adverse effect of the pandemic on FMC's customers and suppliers and the global economy and financial markets. The company is also exposed to the risks related to the delay or failure in obtaining the regulatory approval for its products.

Outlook:  In FY21, the company expects its earnings to be driven by strong volume growth led by Asia, Latin America and North America. For FY21, the company expects its revenue to be between $4.9 billion to $5.1 billion, driven by growth in all regions. Full year EBITDA is expected to be in the range of $1.32 billion to $1.42 billion. The company is planning to release its Q2FY21 earnings on 3 August 2021.

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: Over the last three months, the stock has corrected by 3% and is trading lower than the average 52-week price level range of $123.66 - $96.05. On the technical analysis front, the stock has a support level of ~$101.9 and resistance of ~$115.4. We have valued the stock using the P/E multiple based illustrative relative valuation method and arrived at a target price with an upside of higher single-digit (in % terms). We believe that the company can trade at a slight premium to its peers, considering the rise revenue of Asian regions, strong volume growth expected in FY21, and taking into the company has been trading at a discount in the past 3-years over its peer median. We have taken peers like Corteva Inc (NYSE: CTVA), LyondellBasell Industries (NYSE: LYB), Mosaic Co (NYSE: MOS), etc. Considering the recently received registration from EPA, modest outlook, current trading level, and valuation, we give a “Hold rating on the stock at the closing price of $108.54, up by ~0.31% as on 1 July 2021.

Daily Technical Chart, Data Source: REFINITIV

WEX Inc.

WEX Details

Signed New Fleet Card Agreement: WEX Inc. (NYSE: WEX) is a leading financial technology service provider that serves different sectors, including fleet, corporate payments, travel and health. Recently, the California’s Department of General Services (DGS) and the Office of Fleet and Asset Management (OFAM) awarded WEX a multi-year fleet card contract to provide convenient payment tools California state agencies and other eligible local government users.

Q1FY21 Result Highlights: For the quarter ended 31 March 2021 (Q1FY21), the company reported total purchase volume of $16.8 billion. Total revenue for Q1FY21 stood at $410.8 million, down by 5% on pcp, due to unfavorable impact from fuel prices and spreads. Average number of vehicles serviced during the period stood at 15.8 million, up by 4% on pcp. Net loss for Q1FY21 stood at $2.6 million, down from the loss of $16.3 million in pcp.

Revenue Trend (Source: Analysis by Kalkine Group)

Key Risk: The company is exposed to the risks related to the change in technology as it needs to expand its technological capabilities and service offerings as rapidly as its competitors. Further, it is also exposed to the risks of cyber-attacks.

Outlook: WEX recently expanded its Health offerings by completing the acquisition of benefit express, which is a leading provider of highly configurable, cloud-based benefits administration technologies and services. Looking ahead, the company is focused on delivering increased value to its consumers and partners through its products, services and technologies. With the improvements in macro-economic factors, the faster pace of vaccinations and increasing re-openings across WEX’s end markets, the company expects to see sequential improvements in its results.

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: Over the last three months, the stock has corrected by 8.39% and is trading higher than the average 52-week price level band of $234.64. On the technical analysis front, the stock has a support level of ~$187.89 and resistance of $205.67. We have valued the stock using the P/E multiple based illustrative relative valuation method and arrived at a target price with an upside of higher single-digit (in % terms). We believe that the company can trade at a slight discount to its peers, considering the decline in revenue, negative ROE, also taking into the company has been trading at a discount in the past 3-years over its peer median. We have taken peers like Global Payments Inc (NYSE: GPN), Mastercard Inc (NYSE:MA), Visa Inc (NYSE: V), etc. Considering the decline in Q1FY21 net loss, rise in average number of vehicles serviced, modest outlook and valuation, we give a “Hold” rating on the stock at the closing price of $198.26, up by ~2.25% as on 1 July 2021.

WEX Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.