Next Generation's Software Growing Pains
Despite these near-term troubles, investors have continued to have faith. Despite EA's problems this year, its shares are up 22% over the past year. And Activision and THQ are both up around 75% over the same period.
That's left all of the major U.S. publishers trading at a pricey 28 times or more their estimated earnings for the current year. And all except Take-Two are trading more than 20 times expected earnings for next year also.
Still, the longer-term outlook for the sector is bullish, most analysts believe. PricewaterhouseCoopers, for instance, forecasts that the worldwide market for video games will grow from about $22 billion in 2003 to about $55 billion in 2009.
"In my mind, there's no question that the entire category will be strong stocks in '06. The tougher question is, strong stocks from what point?" says Monticelli.
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