Should you buy shares of Electronic Arts?

video game producer electronic arts (NASDAQ:EA) has performed well for investors in 2022. The stock has significantly outperformed the S&P500 index since the beginning of the year, down only 4% compared to the index’s decline of 13%.

The video game industry is attractive to investors because of the ability of the most popular games to entertain gamers and spend money on content updates for long periods of time. EA’s best games deliver just that in a tough economic environment.

Here are three reasons to consider buying the stock now.

1. Growth of live services

The most important indicator of a video game company’s ability to keep gamers engaged with certain titles is the money they spend on additional content while playing a game. Companies use different terms for in-game spending, but EA calls it live services.

Live services refer to what games have become in the gaming industry. Games are no longer unique selling opportunities; these are year-round services. Players stick with the same game for months at a time, playing online with friends, which means lucrative sales opportunities for digitally delivered content updates.

EA includes several items in its Live Services revenue, such as subscriptions, additional content, and other revenue earned outside of base games. Live services’ share of incremental content, such as spending on games, nearly doubled to $3.9 billion over the past four years, according to Statista.

EA expects total bookings for fiscal 2023 to grow 6% year-over-year to approximately $8 billion, so additional content growth will serve as an important driver.

EA Fifa and Apex Legends games are key contributors to additional content sales that still have growth opportunities. Global interest in football has been a key driver of the momentum of Fifa. The best-selling football title has just completed a record first quarter in Asia, and management is looking to build on that momentum with the upcoming release of FIFA 23.

2. Apex Legends is on fire

EA’s player network grew to nearly 600 million players in the first fiscal quarter of 2023. This growth stands in contrast to the decline in the number of monthly active users at the rival game producer. ActivisionBlizzardwhich saw its player base drop to 361 million from 408 million in the same quarter last year.

Apex Legends was tough competition for Activision Call of Duty over the past year. In the second quarter, Activision reported a decline in game bookings, which the company attributed to lower spending on Call of Duty: Vanguard compared to the previous version of the series.

Meanwhile, Apex Legends has grown steadily since its launch in early 2019. The number of viewers who watch others play the game on AmazonStreaming platform Twitch has grown from less than 20,000 in 2019 to nearly 100,000 this year, according to Statista.Graph showing the increase in average viewership on Twitch of EA's Apex Legends.

The growing viewership on Twitch reflects the game’s contribution to EA’s top line. Apex Legends saw double-digit growth in net bookings last quarter, and EA has just launched a mobile version of the game, which should continue to generate interest.

3. The best value in games

EA has the right mix of sports, action shooters, and lifestyle games (e.g., The Sims) in order to provide consistent returns to investors. The company seems to have established a good pace of releasing frequent content updates for its games, which encourages gamers to come back for more. This gives EA recurring revenue streams that are especially valuable in tough economic times.

The stock trades at a modest valuation of just 17 times forward earnings estimates. This is a discount to the average S&P 500 price-earnings multiple of 21. The relatively lower valuation makes EA the best value among top video game actions at present.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. John Ballard holds positions at Amazon. The Motley Fool holds posts and recommends Activision Blizzard and Amazon. The Motley Fool recommends Electronic Arts. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.