Cramer: Buy Take-Two (TTWO), Electronic Arts (EA) Over GameStop (GME) and Wal-Mart (WMT)

NEW YORK (TheStreet) -- TheStreet's Jim Cramer says Wal-Mart's  (WMT) announcement that it would accept used video games as trade-ins, and the potential effect on GameStop  (GME), has left him "cold" on hardware gaming. He prefers the digital plays, specifically Electronic Arts  (EA) and Take-Two Interactive  (TTWO).

Cramer notes Take-Two is the cheapest in the group and says CEO Strauss Zelnick has done a "remarkable job" with the company.

Cramer does not care for Wal-Mart and GameStop, and he is still waiting for new additions to its video game inventory to recharge the latter. Instead, he likes the actual gaming companies over the retailers.

Must Watch: Jim Cramer Prefers Take-Two, EA to Walmart and GameStop

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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Separately, TheStreet Ratings team rates ELECTRONIC ARTS INC as a "hold" with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate ELECTRONIC ARTS INC (EA) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its solid stock price performance, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income and disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Compared to its closing price of one year ago, EA's share price has jumped by 56.86%, exceeding the performance of the broader market during that same time frame. Although EA had significant growth over the past year, our hold rating indicates that we do not recommend additional investment in this stock at the current time.
  • Net operating cash flow has significantly increased by 88.70% to $685.00 million when compared to the same quarter last year. In addition, ELECTRONIC ARTS INC has also vastly surpassed the industry average cash flow growth rate of -0.21%.
  • ELECTRONIC ARTS INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ELECTRONIC ARTS INC increased its bottom line by earning $0.32 versus $0.21 in the prior year. This year, the market expects an improvement in earnings ($1.31 versus $0.32).
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Software industry and the overall market, ELECTRONIC ARTS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Software industry. The net income has significantly decreased by 584.4% when compared to the same quarter one year ago, falling from -$45.00 million to -$308.00 million.
  • You can view the full analysis from the report here: EA Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Separately, TheStreet Ratings team rates GAMESTOP CORP as a "buy" with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation: 

"We rate GAMESTOP CORP (GME) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, reasonable valuation levels, good cash flow from operations and compelling growth in net income. We feel these strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 7.3%. Since the same quarter one year prior, revenues rose by 18.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 111.41% and other important driving factors, this stock has surged by 44.71% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, GME should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Specialty Retail industry. The net income increased by 111.0% when compared to the same quarter one year prior, rising from -$624.30 million to $68.60 million.
  • Net operating cash flow has significantly increased by 80.29% to $680.60 million when compared to the same quarter last year. In addition, GAMESTOP CORP has also vastly surpassed the industry average cash flow growth rate of -19.02%.
  • You can view the full analysis from the report here: GME Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Separately, TheStreet Ratings team rates WAL-MART STORES INC as a "buy" with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation: 

"We rate WAL-MART STORES INC (WMT) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, reasonable valuation levels, increase in stock price during the past year and notable return on equity. We feel these strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • WMT's revenue growth has slightly outpaced the industry average of 6.8%. Since the same quarter one year prior, revenues slightly increased by 1.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has slightly increased to $9,937.00 million or 2.61% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -11.58%.
  • WAL-MART STORES INC's earnings per share declined by 19.8% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, WAL-MART STORES INC reported lower earnings of $4.86 versus $5.01 in the prior year. This year, the market expects an improvement in earnings ($5.30 versus $4.86).
  • In its most recent trading session, WMT has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • You can view the full analysis from the report here: WMT Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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