Remember: The stock doesn't have to go down to make the P/E go down... The other thing that makes the P/E go down is an increase in earnings. The earnings will be picking up as the rest of the consoles hit the market. Not to mention "other" revenue streams that will increase earnings.
You see all that cash? Expect earnings from investments to start going up as the fed raises the yield on bonds. Has anyone heard of advertising in games? Expect EA to start getting a nice stream of $ from advertisers as well..
In 10 months we'll be trading off the #'s for FY08' (which starts after Mar07'). Take a minimum of 1.40/Sh & use a historically LOW 40P/E and you get 56. Use 1.5 and a still modest 45P/E and it�s $67.5... Considering the kind of premium EA will actually garner and you can easily get into the 70's. If you don't see/believe the "other $ streams will show up then stay out. I'm in and not worried in the slightest.. Start averaging into a position if you don't have one.
This company makes money selling games. Have you been in a game store lately? How about Wal-mart or Target?
I was in all this weekend as well as Gamestop, EB Games and Best Buy. No one was buying any games. My 11 year old son had $50.00 to spend and he bought a $9.00 used title. Nothing new on the shelf interested him!
Call it what you will; cycle of console change over, lack of blockbuster titles or reduced discretionary funds. Even the hard core gamers are getting squeezed by $3.00 gas.
All I am saying is in this sector, with this market and ERTS's reduced guidance; now is not the time to commit funds to this stock.
There was a point in time when GE CSCO MSFT and PG commanded higher p/e's but history is not helping them now. Once a stock falls out of favor it is a long hard battle back up.
The street is always willing to gamble for the future but enough disappointment will send them running elsewhere. The markets have shown recently that the doors are wide open and investors are in evacuation mode.
IMHO this will not end till the Fed stops. Even good companies with upside surprises and strong guidance are suffering. I honestly wish it was not so but I think we can buy ERTS much cheaper come Sept. Why spend summer in the red?