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
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV