Electronic Arts (NASDAQ:EA) stock has struggled, down 33% over the past year. In the past month alone, EA stock has lost 11% of its value, vastly underperforming the markets. 

Worse still, EA CEO Andrew Wilson sold almost 62,000 shares of Electronic Arts stock over the past year, two recent SEC filings show .

EA has faced considerable criticism in recent months about its business strategy from many in the business media, including some other InvestorPlace columnists. 

What we do know is that analysts, on average, expect EA’s revenue and earnings to fall when it reports its fiscal first-quarter results on July 30. 

On the top line,  analysts’ consensus outlook is $724.95 million. On the bottom line, analysts, on average, expect its EPS to fall 93.3% to 1 cent.In the same quarter last year, the company’s EPS came in at  15 cents. Its EPS in fiscal Q4 of 2019 was 69 cents.  It’s easy to see why investors are concerned about what’s happening at Electronic Arts.

They say insiders sell stocks for all kinds of reasons — wedding, diversification, new home, child’s education, etc. — but they buy shares for just one. However, the CEO is supposed to project a shining ray of hope. Selling while EA stock price is sharply declining and ahead of results that are supposed to feature a sharp year-over-year profit drop does not instill confidence in the troops. 

It’s one thing for the company to repurchase EA stock — it bought back 11 million shares in fiscal 2019 for $1.19 billion — but it would make a bigger impact if the CEO was forking out his own money to make purchases in the open market. 

So should the owners of EA stock be worried?

Here’s a look at both sides of the argument.

The Owners of EA Stock Should Be Worried

EA stock has lost 38% over the past year, yet its CEO has sold shares during that period. The company was buying Electronic Arts stock, so why wasn’t he? I realize there were plenty of reasons for the CEO to sell stock, including the fact that the options and stock grants he received are free money. He’d be crazy not to cash some of that in. 

But right now, investors are wondering if Electronic Arts’ best days are behind it. Analysts, on average,  currently expect EA’s EPS to increase by an average of 6% over the next five years, yet its stock has a forward P/E of 17.9. That’s a pretty expensive valuation for a  company that’s not expected to average double-digit-profit growth over this period. 

InvestorPlace columnist Ian Bezek recently wrote a scathing criticism of Electronic Arts’ business strategy, questioning why it didn’t release a mobile version of Apex Legends when mobile gaming is by far the fastest-growing segment of the international gaming market. 

Great question. 

While EA’s  mobile revenue grew by 10% in Q4 to $190 million, that still only represented 15% of Electronic Arts’ overall revenue. It’s got to do better because the revenue of  EA’s console business, which accounted for 66% of its overall sales in 2019, declined by 31% in Q3 and 8% for the entire year. 

Mobile is delivering good growth, but it’s got to do better because the console business appears to be weakening.   

The Owners of Electronic Arts Stock Have Nothing to Worry About

Over the last three years, EA’s annual free cash flow has averaged $1.49 billion. That means it’s turning each $1 of income into $1.49 of free cash flow and each $1 of revenue into 30 cents of free cash flow. 

The farther EA stock declines, the more stock it can repurchase with the same amount of free cash flow. I’ve never been a fan of buying back stock because most companies do it at absolutely the wrong times. In this instance, EA is wise to be buying Electronic Arts stock, even if its CEO isn’t following suit.

In my most recent article about EA, I argued that, despite the cold reception for Apex Legends 2, EA stock was a buy. Included in my rationale was the further development of EA Originals, the independent label it launched in 2016, which has delivered a lot of solid content and will continue to do so in the future. 

Also,  let’s not forget that its console business will do a heck of a lot better when new Xbox and PlayStation consoles appear in 2020. EA’s console business  might be down, but it’s not out. 

Overall, business is just fine at EA. 

Wilson’s got the right to acquire more than 800,000 shares in the future. Hopefully, he will. EA stock could use the endorsement. 

The Bottom Line on EA Stock

Electronic Arts currently has a free cash flow yield of 6.7% based on an enterprise value of $22.2 billion. That’s approaching value territory. 

We know EA’s next two or three earnings reports aren’t going to be pretty. However, EA tends to deliver positive surprises when it comes to earnings, so I wouldn’t be  shocked if its results beat consensus estimates on July 30. 

In the meantime, I’d worry less about what the CEO is doing and focus on how to make money on EA stock. 

At $90, I like Electronic Arts stock. At less than $90, I really like it.  

At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.