% | $
Quotes you view appear here for quick access.

Electronic Arts Inc. (ERTS) Message Board

  • Rab_Nesbitt Rab_Nesbitt Jul 19, 2000 2:34 PM Flag

    Maybe that's the problem Spo

    People like myself, yourself, Nsthil et al track
    this industry very closely and we're all stunned the
    stock can be in the $85 range. Hell that's a P/E of 75
    on '01 EPS!!!!! That's not only 3-5 times the P/E of
    other gaming stocks like TTWO, ATVI, THQI, THDO, but
    also the stock has risen by around 40% during the time
    the EPS consensus has dropped 40%. How does that
    work? Even the '02 EPS has been revised down
    significantly in that

    IMO, any surprises around earnings time are going to
    be negative and are going to mean more downward EPS
    revisions. Sony has manufacturing problems with PS2 so it's
    unlikely they can boost the consumer base there beyond
    current forecasts, is launching late, and key software such as Motor City is running very late.
    The Dolphin launch date has slipped publicly in
    recent months... SSX didn't ship in Japan this
    quarter... the list goes on and on, but it seems people who
    maybe don't follow this industry as closely as us just
    don't care about any of that. Maybe our problem is
    we're too close to it! Murphy's Law dictates as soon as
    we go long with a significant amount then some
    analyst comes out and says ERTS P/E is too high to
    sustain, c'est la vie.

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • >C the Forest . .. well, FIFA should make it .
      . . it is already out in Japan, right? SSX . . .
      that should make it too. I hear the Bond game is in
      disarray however. That's a pity because I was looking
      forward to that. Maybe the PC one will make it out this

      You are right in that FIFA and SSX will
      probably be there, but realize these are basically ports
      from games that already existed, which is why I
      overlooked them, I guess. Bond is not even

      I've never quite understood how it was
      going to be anything positive besides a nice pump &
      dump Internet stock hysteria move. Now that the
      Internet hysteria has died down, I'd think just
      looks like a big cash black hole.



    • "Re:
      I've never quite understood how it
      was going to be anything positive besides a nice pump
      & dump Internet stock hysteria move. Now that the
      Internet hysteria has died down, I'd think just
      looks like a big cash black hole."

      I agree Spec,
      there was that Forbes article last week which said the
      online gaming biz should be worth "close to $800 million
      in revenue by 2003". First of all, EA won't own all
      this, there's also Verant, Sega, MicroSoft et al
      sharing this space, maybe Nintendo too. Secondly, this
      means the revenue in three years will be around 10% of
      the current video gaming revenue. Woo-hoo!!! (sarcasm

      C the Forest is right about the laughable internal
      state of development, but I do think there will
      be more PS2 launch titles from EA because they'll
      ship them bugs and all if necessary. FIFA, SSX and
      Madden all look good (though SSX played terrible at E3),
      but each of those has had the greatest dev time (4
      years for SSX, almost 2 years for Madden) so don't
      expect the other launch titles to be as strong because
      they've had rushed development.

    • >People like myself, yourself, Nsthil
      et al track this industry very
      >closely and
      we're all stunned the
      >stock can be in the $85
      range. Hell
      >that's a P/E of 75 on '01

      Rab, do you really believe that the P/E means that
      much? If investing was so simple as calculating P/E
      then everyone would own companies like Ford (which I
      own, as well as lots of ERTS).

      Anyone who
      believes P/E is the deciding factor in where to invest in
      the computer/videogame industry would have invested
      in companies like Activision and Acclaim last year.
      In fact, I seem to remember a lot of people
      suggesting these companies last year, were you one of them

      I made that mistake of focusing on P/E
      and projected growth rates last year and bought
      Activision. Fortunately, I also bought some accounting books
      and studied EA's and Activion's finances (e.g. cash
      flow, R&D %, DSO etc.). Activison's P/E and growth rate
      looked more attractive than EA's, but it was all smoke
      and mirrors. Fortunately I realized that early this
      year and sold my Activision near it's high to buy more

      Also, remember that hard as it may be to believe, some
      people are focused on more than the current quarter. The
      future looks good for EA, and even if I think the stock
      looks a bit pricey now, I won't sell.

      It's easy
      to pick some weak points with a large company like
      EA, they release so many titles that some are bound
      to be delayed or duds. Rather than focus on SSX
      being late, I am more interested in reading all the
      extremely positive previews for it, as well as for Madden
      PS2, and many others.

      • 1 Reply to rrb1830
      • Thank you for your points rrb1830, they're all
        valid and it seems so rare we have a dedicated long
        posting anything here other than "shorts getting screwed
        today, hahaha".

        To some extent P/E is important,
        at least in that I wonder how long such an imbalance
        between the P/E of ERTS and all the other companies in
        this sector can continue. To be off by a factor of 5
        would seem to suggest either ERTS is over-valued or the
        others are under-valued, or some combination in between.
        Too often recently I've seen everyone pumping the
        "quality" stocks in their respective sectors like CSCO,
        YHOO et al, theory being if you want quality you have
        to pay for it, then next day some broker or analyst
        or Barron's article says it's over-bought and you,
        the common investor who rarely gets this news at the
        same time as the big boys, gets burnt.

        rrb1830, last year I traded ATVI buying on the dips and
        did well, but I never held it for long. Then after it
        dropped to $6 recently I started accumulating, it just
        looked like too much of a bargain to pass over. They're
        my other long term favorite in the sector. I don't
        believe companies like THDO and MWY have the product
        quality or franchise power to grow revenues
        significantly, and I've never recommended AKLM!!!

        If you
        agree the ERTS stock looks a bit pricey now then why
        not take some profits and keep some holdings, and
        then buy back in cheaper?

    • Last I heard, Jr. was still doing it in the
      jailhouse. LOL

      Yea, you're both right, 'em antitrust
      g-men would have a field day with this one. Anyway, if
      ERTS hit 90+ tomorrow, I'll be snorting big time. ;-)
      Volume was rather decent today, and every panicked
      seller in the down day today or yesterday were met with
      buyers. Go figure.

    • Pray tell, what else is on that list? You
      mentioned that "the list goes on". I am wondering what else
      other than what you said is negative coming up in the
      future. It seems to me you probably covered all of the
      reasonable and even "guess" ones. dolphin launch date? There
      has never been an official dolphin launch date
      publicly stated.

      • 1 Reply to toonse_
      • problems like multiple projects canned
        at Origin, the exodus of online talent from there to
        Verant, the commercial failure of WCW Mayhem to meet
        forecasted numbers, the financial penalties to AOL for
        missing the first delivery date, earnings
        disappointments and warnings and from retailers in the past
        quarter, PS2 performance much weaker than promised by
        Sony, unexpectedly high PS2 development costs due to
        the multi-processor hardware complexity,
        underwhelming software penetration in Japan...

        Is that
        enough for you toonse?

        Nintendo originally
        promised Dolphin in Japan before Dec 2000, now recently
        they've admitted to a Spring launch. They've never named
        a specific "date", that much is true.

    • That's amazing. The next closest game company is
      EIDOS coming in at around $700M and IMHO that's way
      overvalued on take-over hype. After that is Midway with
      $300M or so.

      Yes, ERTS is the 800lb Gorilla.
      But isn't it true that "the bigger they are, the
      harder they fall."? Well, I do believe that ERTS has
      done the best job at preparing for the next generation
      by creating a zillion PS2 titles . . . a
      self-fulfilling prophecy to make the PS2 suceed and the DC fail.
      But still . . . ERTS has to get hurt from the
      slow-down of PSX & N64 sales. They have lucked out with the
      runaway success of the Sims, but that can't hide all
      those PSX & N64 sales declines.

      I'm still
      sitting on the sidelines, but I think I'll have the
      courage to short soon. There has to be a dip sometime
      between now and when the PS2 hype begins in earnest. The
      upcoming earnings may be the catalyst to start a fall if
      they are even lower that the current estimates.

      • 2 Replies to SPECULAWYER9
      • You're instincts guide you well. ERST has a
        pathetic/non-existent Playstation 1 slate and all but one of their
        PlayStation 2 titles are going to be late and probably miss
        Christmas. Their online venture is a train wreck, depleting
        their reserves, both financial and human, at the time
        they should be 100% focused on the transition to the
        Playstation 2 and X-box.

        This will likely come to a
        head before the end of the calendar year, and the
        stock could drop 50% or more.

        They ought to buy
        Activision who has the best Playstation 1 slate in the
        industry, with several great franchises, and a very low
        valuation. This is a no-brainer, but they better hurry.

      • Microsoft has been accumulating ERTS? They want
        their PSX machine to be the one. That got to be the
        only reason I can think of in this negative market
        day. Think about it ... an 800-lb gorilla seeking to
        mate with this 800-lb gorilla?

    • "it seems people who maybe don't follow this
      industry as closely as us just don't care about any of

      BINGO! We have a winner. You my have just hit the nail
      on the head. This is good old fashioned hype, and as
      i've said before its a very powerful thing.

      too am surprised, because of impending earnings
      announcements. If I was a short man, I'd take a stab in the mid
      eighties myself, but im not. I do suspect that earnings
      will be shaking that tree, but I still remember when
      you guys were talking forties. No way will we see
      that. Even a drop from earnings will not be too
      significant in the marlons opinion because I think there are
      guys out there like me just dying to have this stock
      slump so that we can pick it up cheaper before the
      really big hype machine starts to play its tune. The
      next three weeks are key in my opinion.

59.84-0.05(-0.08%)Apr 27 4:00 PMEDT