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, ea.com is launching late, and key
ea.com 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.
>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 ea.com just
looks like a big cash black hole.
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 ea.com 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 ea.com 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
we're all stunned the
>stock can be in the $85
>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).
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.
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.
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
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!!!
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
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
...studio 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 ea.com 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...
enough for you toonse?
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.
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.
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.