Gamers Flirt With Bargain Bin
Shares of video-game publishers are nearing rock-bottom prices, but is it time to start betting on a rebound?
That depends on who you talk to and how long you feel like waiting. Some investors, for instance, see short-term plays to be made in at least some of the names -- Electronic Arts (ERTS) comes up repeatedly -- in the run-up to the holiday season.
"Clearly, there are big catalysts on the near-term horizon," says Darren Chervitz, a research analyst at Jacob Asset Management, pointing to the expected release this fall of new game machines from Sony (SNE) and Nintendo. "When the market environment gets better, as we get closer to the holiday season, these stocks will benefit," adds Chervitz, whose firm is long EA and THQ (THQI).
Others buysiders say that with publishers' stocks having sunk so low, they're also starting to look good for the longer term. Activision (ATVI) and Take-Two Interactive (TTWO) both hit 52-week lows this week, while EA and THQ are within spitting distance of theirs.Thanks to the selloff, many of the stocks have started to look particularly cheap, relative to where they've historically traded, especially for what has been one of the fastest-growing sectors. For instance, excluding net cash, Activision is trading at about 15 times next year's expected earnings and Take-Two at about 12. "We're there. We're still buying. We still think it's time to be buying," says one hedge fund analyst who asked to remain nameless, but whose firm is long shares of EA and Take-Two and is looking at Activision. Although short-term results at many of the firms won't be good, "longer term, we're definitely not worried," the analyst says. Still, other investors say that the best play right now is to simply stay away. Even if these stocks rally going into the holidays, they'll likely sell off afterward, just like they did last year. And the stocks likely won't pick up for good until sometime next year -- if that soon.
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