Here's what the analysts *really* think about ERTS, and why.
Doug Creutz, Cowen: “The pre-announcement largely reflects poor performance by key EA titles due to quality issues.” Maintains Neutral rating.
Colin Sebastian, Lazard Capital: “The announcement confirms our channel checks that a number of EA’s key software releases are underperforming expectations.” He adds that industry trends “remain stable,” but that “the weaker consumer is contributing to growing disparity in product performance.” He sees continued strong sales of Nintendo hardware, Microsoft’s Xbox 360 and some software titles, including Call of Duty, Wrath of the Lich and Wii Fit. He keeps his Hold rating.
Brent Thill, Citigroup: Cut his rating to Hold from Buy; target to $21, from $31. He notes that economic conditions are driving retailers to be cautious on inventory levels. He sees a valid long-term turnaround story here, but says that “near-term macro conditions dominate and 2009 likely will remain tough.”
Eric Handler, Barclays Capital: Cut rating to Underweight from Overweight; target to $17, from $36. He says that a lack of top-10 titles is leading to disappointing financial results, and advises investors to stay away.
Daniel Ernst, Hudson Square Research: Cuts rating to Hold from Buy, and notes that EA’s current slate of games “failed to capture sufficient consumer interest.”
Robert Haley, Gabelli & Co.: Cuts rating to Sell from Buy. He notes that the company is feeling the effects of greater concentration of industry revenue in top 5 and top 10 titles. He says the company is basically admitting that its current strategy is flawed.
Michael Pachter, Wedbush Morgan: “Just when investors began to believe that things couldn’t get any worse, they did, and we believe that investors remain skeptical that management is on the right track.”
Evan Wilson, Pacific Crest: Maintains Sector Perform rating. He notes that EA this year release a range of titles, spending a fortune in the process and that none were breakout hits. “We continue to believe that EA’s actions exacerbate the negatives that the videogame industry as a whole is facing.”
Edward Williams, BMO Capital: Maintains Outperform rating. “As consumers battle the macroeconomic issues, the breadth of the strong performing games is not as significant as it has been during prior holiday periods leading to reduced retailer re-orders.”
Anthony Gikas, Piper Jaffray: Cuts rating to Neutral from Buy; target to $18, from $38. “We apologize for being wrong on the EA story and late to admit that this is a broken story,” he writes. “EA was on the wrong train (PS3) coming into this cycle, never right-sized R&D spending, and the huge success of the Nintendo Wii’s platform absolutely destroyed market opportunity for third party publishers like EA.” He says the growth phase of the game cycle is essentially over, and “EA is now faced with turning around the business in a flat to declining market during the next few years.”
Entire market goes up, ERTS goes down. If this isn't a sign of a dying dog, I don't know what is. What does this stock possibly have going for it? A buy-out rumor? I have one response to people who expect a buy-out and think that's a good reason to hold a stock...
Sell ERTS, buy GME
I don't trade with the analysts. I don't buy if they say buy or sell if they say sell. What I do is listen to *why* they make their analyses, and then I think for myself, find supporting or refuting evidence and check the facts myself.
I invite you or anybody else here to refute the claims of the analysts cited above, or show us how those claims do not justify why ERTS will underperform.