Electronic Arts: Shock Therapy
Earnings have fallen two straight years at Electronic Arts (ERTS), and the company expects things to get worse. But that hasn't shaken the faith of many long-term holders -- nor dissuaded others from buying in.
EA's shares fell as much as 14% on Thursday after the video-game software provider offered an extremely disappointing outlook that called for earnings as low as one-third what analysts were expecting.
Despite the slide, many analysts and longer-term holders are willing to continue giving the company the benefit of the doubt and chalk up the company's recent problems to transition troubles as the industry moves to a new generation of hardware. As the largest video game publisher, EA stands to benefit as a mass market starts to develop in coming years for new game consoles and the software for them, bulls say.
"Despite where we are in the cycle, the fundamentals are strong,"
says Darren Chervitz, a research analyst at Jacob Asset Management.
"Over the next couple of years, I think [video-game-publisher stocks]
are good investments." Chervitz' firm is long EA and
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