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Electronic Arts Inc. (ERTS) Message Board

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  • overrated_author overrated_author Feb 20, 2011 10:47 AM Flag

    i cant believe this. i am in shock. i coded games in assembly language for 20 years.

    strategic buyers, private equity firms, and hedge funds don't look at P/E ratios they almost exclusively look at ENTERPRISE VALUE when conducting diligence work. i.e. EV/Ebitda and EV/Revenue metrics are more relevant than some GAAP accounting metric of P/E or P/B. earnings for ERTS are coming off a depressed base and the Street isn't adequately handicapping the potential of this company to reinvent itself across digital/social gaming. i.e. don't look at a headline P/E ratio. Washington Mutual was trading under 8x P/E before it completely unwound...

    the insider selling hasn't been THAT significant i.e. not $1-$5 million trades. they're trimming their holdings - insider buying is always more telling than insider selling, agreed. but i think they're selling because it's finally starting to move up from a long 2 year static base.

    and lastly, i would never follow Carl Icahn's trading tactics the man is a senile, inarticulate greenmailer who somehow runs a mediocre hedge fund with the money he built up over the years. he's a far scream from a david einhorn, john paulson, or a phil falcone.

    ERTS is CRITICALLY undervalued relative to the paradigm shift happening in gaming today. ERTS have #1 market share in digital gaming and have strong relationships with independent publishers. ERTS are a #3 in social gaming and probably not far from matching #2. The company has a steady annuity-like franchise in sporting games and that is not going to disappear anytime soon. Also, there is a pretty high short interest in the stock, so I'd bet on MORE short-covering like we saw on Wednesday morning.

    Stay tuned here. ERTS has had two +100% return years this past decade, once in 1999 and the other in 2003. I think 2011 will be a similar year for ERTS and I am long call options at the $21, $22.50, $25, and $30 level all the way out to Jan 2012. The technical breakout we saw on last quarter's earnings was TECHNICALLY RELEVANT and will hold. Again, I am looking for a +100% year in ERTS with a steady stream of catalysts, including earnings, institutional buying, share buybacks ($600m), earnings up-guidance, and lastly, buyout talk from a Disney or Microsoft.

    TTWO is not even on my radar screen - ERTS has much more BRAND EQUITY value and a much better base of intellectual property.

    Let me repeat, DO NOT FOLLOW CARL ICAHN. The man is delusional.

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