I've been following ERTS everyday/everyhour since the +15% rally on February 18th.
Today's thrust above $26 and closing at a 52-week high was relevant.
I think it was short-covering (had been 14 million shares short) that are worrying about a very rich Zynga valuation and what that means for ERTS digital business. If Zynga get a valuation above $10bn that automatically means that good ol' EA should have an enterprise value of minimum $10 - $12bn... like I've been saying, 5.0x EV/Revenue for the digital business (growing 30-50% per annum) and then 1.5-2.0x EV/Revenue for the packaged goods business HD games. This is a $38-$42 asset based on CURRENT FUNDAMENTALS AND WHAT WE KNOW ABOUT ERTS.
If Star Wars does ONE THIRD of what World of Warcraft achieved last 10 years, that is a significant game-changer and places margins, profitability, growth assumptions, valuation etc in a completely different ballgame.
I stick to my claim: ERTS is a $40 stock BASE-CASE ASSUMPTION.
Blue-sky best upside scenario calls for $45-$50 in a takeout were it to happen today (30-40% chance next 12 months). Disney, News Corp, Viacom - NEED DIGITAL CONTENT. Vivendi beat them to the punch by controlling Activision-Blizzard years ago. They need to play catch-up, which = M&A.
Definitely eyes on Groupon turned eyes on next big IPO, Zynga, turned eyes on sector competition ERTS.
I was very surprised at the big day for ERTS, up around 10% at one point. I don't think you should bet on ERTS as a takeover, bet on it for it's growth potential and fundamentals. Disney ponying up $16billion for ERTS is too expensive for a company that doesn't make large sums of money.
If Battlefield hype gets crushed by COD then... Obi-wan... you are our only hope!
Still on the books they are going to have a monster quarter whether or not it gets priced into the stock price before earnings I would be concerned about their forecast. Their big cards are being played right now. Looks like the EU will sort it self out with a couple bumps here and there, so if the market stabilizes then ERTS could be a great buy and hold. My only issue is the indices are WAY to high for this economic climate and could see a 2000 point correction on the DOW and a 400 point correction on the NASDAQ. ERTS PPS would not hold up against such a correction.