Electronic Arts (NASDAQ:EA) has had a crazy year. EA stock kicked off the year around $110 per share. It soared to as high as $150 in July. But following the recent selloff of tech stocks and the raising of concerns about the launch of the company’s Battlefield V game, EA stock has now plummeted to just $85. That’s close to a 40% decline in just a few months.

Part of the reason for the massive decline of EA was clearly the weakness of the tech sector. The FAANG stocks are in freefall, and their retreat is causing many other high-fliers to tumble. But there are some important concerns about Electronic Arts stock. These worries are focused on the recent debut of Battlefield V.

The Battlefield V Controversy

The Battlefield shooter series has long been a cash cow for Electronic Arts. Heading into last week’s release of Battlefield V, the franchise had sold more than 60 million copies.

However, the series’s latest iteration had a major snafu. The game’s trailer featured women in combat. Many players viewed this as an inaccurate depiction because the game is based on World War II.

The trailer racked up dislikes by the hundreds of thousands. EA’s former chief creative officer, Patrick Soderlund, doubled down on EA’s gender controversy, saying “On the [women] in Battlefield, this is something that the development team pushed… The common perception is that there were no women in World War II. There were a ton of women who both fought in World War II and partook in the war.” Soderlund also called those complaining about the depiction “uneducated.”

Although Soderlund soon left Electronic Arts, his departure may have been too late. By making a divisive statement and not immediately walking it back, EA offended a decent chunk of its potential customer base.

Battlefield V launched just in time for Black Friday and the holiday shopping season. As a result,  we don’t have solid data on how well it has performed yet. In August, however, market research firms concluded that pre-orders of the game looked soft, although they did not believe that the game was poised to be an outright flop.

Record Sales Still Not Enough

The video game industry had an extremely impressive month of October. For the month, sales came in at $1.54 billion, representing a massive, 73% gain. Of course, some strong, new game launches that took place last month definitely positively impacted the industry’s sales. Regardless, the $1.54 billion haul is a new record for the month of October, topping the old record of $1.36 billion that was set way back in Oct. 2008.

But even the huge sales figures have done little to prop up video game stocks. In addition to the crushing decline of EA stock, Take Two (NASDAQ:TTWO) and Activision Blizzard (NASDAQ:ATVI) have also pummeled, with ATVI stock plunging from $85  at the beginning of October to $50.50 today.

It’s clear that investors got ahead of themselves with these stocks earlier this year. Yes, the gaming industry is posting excellent sales, but the stocks’ price-earnings ratios had exceeded 30 at one point. That valuation is arguably much too high for cyclical companies that still live or die based on the performances of their new games.

A Changing Business Model

The positive thesis on video game stocks has been that a switch to digital revenue streams will make video game makers’ earnings more stable. As players buy more downloadable content, games will generate revenue well after they are launched. For example, The Sims games have generated revenue from microtransactions for years after their launches.

EA’s latest earnings results show that the company is continuing to benefit from this trend. The company’s services and other revenues grew at a 30% clip. EA stock will rise as its services revenues make up a greater proportion of its overall revenue. As EA’s service revenues increase, EA stock is less likely to plunge if one of its blockbuster games like Battlefield underwhelms gamers.

But EA still has a lot more to prove, since its long-term track record has been mixed, even though EA stock has been quite strong in recent years. EA’s top line exceeded $4 billion in 2009. Almost a decade later, it’s at $5.2 billion, representing less than 25% growth over that span. That’s not the sort of growth you expect from a company with a high price-earnings ratio.

EA Stock Is Set to Bounce in the Short-Term

In the wake of the market’s recent brutal selloff, the trailing price-earnings ratio of Electronic Arts stock has fallen to a more reasonable 21. That’s down from its peak of more than 30. But EA stock is fairly valued after its 40% plunge, as it had no business reaching $150 earlier this year.

EA’s digital strategy is going well. There will always be jitters about new game launches, but the company’s strong franchises across many styles of games give it an excellent moat.But we have to see if EA’s recent, relatively rapid growth continues. Electronic Arts stock will get even cheaper if the company’s revenue growth rate reverts to its historic average.

One other area of concern for owners of EA stock is the company’s stock buybacks. Electronic Arts has been buying back modest amounts of EA stock. However, the company increased the pace of its buybacks this quarter fairly dramatically, as it spent $153 million on buybacks in the third quarter of 2017 and $299 million last quarter. Given the high valuation of Electronic Arts stock last quarter, the share repurchases in Q3 may not have been very well-timed Meanwhile, EA insiders have been selling EA stock throughout the year.

All that said, it’s important to remember that Electronic Arts stock has fallen 40% since July. And its business is fundamentally healthy. So anyone buying EA stock on weakness now is likely to make money when the shares rebound. Over the longer term, however, EA stock is still a high-risk, high-reward proposition.

At the time of this writing, Ian Bezek held no positions in the aforementioned securities. You can reach him on Twitter at @irbezek.