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Electronic Arts: Your Next Move

NEW YORK (TheStreet) -- Electronic Arts (EA) was slipping 0.3% on Wednesday to $17.10 following the announcement earlier this week that CEO John Riccitiello will step down, effective March 30. Based on recent news and general outlook, this stock movement smells like a short. I would only go long if the stock is whacked down to $13.



EA, which is most well-known for the video game franchises The Sims, Madden NFL, FIFA Soccer, Need for Speed, Battlefield and Mass Effect, is currently in a weak position. Its 52-week range is from $10.77 to $19.51. The company hit $19.30 in early trading on Tuesday, up 3% from Monday's $18.71 close. However, despite the brief rally on news of EA's leadership change, investors have turned cold. Shares fell 8.34% on Tuesday, closing at $17.15.

At this point, EA could still be a great stock to short -- as low as it has gone, it could still sink lower. This is a company without a head and not much to look forward to earnings-wise -- a poor prospect for a video-gaming company, given the need to stay on top of the trends, both with regard to what people want to play and the ways in which they want to be able to access that content.

At a minimum, EA is going to go down in share price before it goes up.

Right now, EA is coming up on the close of its fourth fiscal quarter at the end of the month, which is expected to coincide with the release of "Dead Space 3" and "Crysis 3" -- and the outlook is not good. Each of these titles are sequels in franchises that have disappointed critics, and in the current market, there just isn't room for errors.

PlayStation is set to release a new console later this year; Xbox has not announced it yet, but is also expected to release a new console later this year. Then there is the changing market in the gaming industry with which to contend. More people are turning toward downloads instead of buying the actual game discs and then there is the issue of mobile gaming to compete against -- and all those gamers on smartphones and tablets.

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