Is Electronic Arts being Overvalued?

The P/E ratio is >50. This is high especially compared to other video game publishers, most notably Activision, which is the publisher that owns the call of duty franchise with a p/e of <40, which can be believed to be an obvious indicator.

EA’s value comes from the future growth expected by the company. This future growth is expected from 2 main factors, licensing deals with Pro sports leagues (NFL) and Disney + Star Wars.

The reason I think this is because EA has been in possession of these exclusive licensing deals for years and even decades. EA has had the exclusivity of pro league licensed sports games for as long as most of us have been around, and its Star Wars deal has been old news for about half a decade and to make matters worse EA has lost its exclusive deal for Star Wars to Ubisoft (another video game publisher).

These deals are not likely to ale EA more valuable and it is much more likely that EA loses these deals than for EA to actually start making sufficient growth in its revenue or any other area of the company for that matter.

Do you all agree to these insights?