Will Electronic Arts (EA) be Able to Close the Valuation Gap?

Maple Tree Capital, an investment management company, released its Q1 2025 investor letter. A copy of the letter can be downloaded here. Q1 2025 saw a strong start but turned sour due to tariff concerns and macroeconomic fears, leading to a sharp market pullback, with the Nasdaq falling nearly 22% from its highs and the S&P 500 down 20%. Despite the challenges, the firm made significant progress this quarter by averaging in the top-conviction stocks, utilizing covered calls, and exercising patience. Maple’s growth-oriented fund, Jonagold, has become a standout performer, greatly surpassing all major benchmarks since its launch in 2023. While Heartwood is still facing difficulties. Maple Tree Capital’s Jonagold returned -13.64% in Q1 compared to the Nasdaq’s -10.26% return and the Russel 2000’s -9.48% return. Maple Tree Capital’s Heartwood returned -18.04% in Q1 vs. the S&P 500’s -4.27% and the Dow Jones’ -0.87% return. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its first-quarter 2025 investor letter, Maple Tree Capital highlighted stocks such as Electronic Arts Inc. (NASDAQ:EA). Electronic Arts Inc. (NASDAQ:EA) markets, publishes, and delivers games, content, and services for game consoles, PCs, and mobile phones. The one-month return of Electronic Arts Inc. (NASDAQ:EA) was 1.23%, and its shares have appreciated by 11.93% over the past 52 weeks. On May 28, 2025, Electronic Arts Inc. (NASDAQ:EA) closed at $146.88 per share, with a market capitalization of $36.833 billion.

Maple Tree Capital stated the following regarding Electronic Arts Inc. (NASDAQ:EA) in its Q1 2025 investor letter:

“Electronic Arts Inc. (NASDAQ:EA) trades at a 33x earnings multiple due to heavy R&D spend, yet it trades below 20x free cash flow. This is a disconnect between near-term profitability and long-term value creation. Electronic Arts has consistently invested more in R&D than its peers, positioning itself to lead in the AI-driven future of gaming. While their new game Dragon Age was by all means a “flop” and video game trends softened into the Q1, EA’s position is still extremely strong with their licensing power. It is only a matter of time before an activist stake could help close this valuation gap by pushing for clearer capital allocation, improved communication and a stronger focus on user experience.”

Electronic Arts Inc. (NASDAQ:EA) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 43 hedge fund portfolios held Electronic Arts Inc. (NASDAQ:EA) at the end of the first quarter, which was 45 in the previous quarter. In Q1 2025, Electronic Arts Inc. (NASDAQ:EA) reported net revenue of $1.9 billion, on a GAAP basis, up 7% from Q1 2024. While we acknowledge the potential of Electronic Arts Inc. (NASDAQ:EA) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the undervalued AI stock set for massive gains.

In another article, we covered Electronic Arts Inc. (NASDAQ:EA) and shared the list of best gaming stocks to invest in according to billionaires. In addition, please check out our hedge fund investor letters Q1 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.