Analysts brought down next years ERTS' estimates to .79 from 1.01. so as far as next year EPS for ATVI and ERTS goes it's .77 for ATVI and .79 for ERTS, basically the same $ per share of earnings. As of 11:21AM ATVI is trading @ 10.89 and ERTS is @ 16.95. ATVI iS 36% cheaper than ERTS!!! I'd argue if anything we should be the ones commanding a higher valuation. ...so in the long run ERTS must come down, or ATVI must go up to close this UNBELIEVABLE valuation gap.
For one atvi is worth more than twice as much as erts...and you need to understand why that is before speaking any further. Stock price doesn't matter at all, its just a price which reflects supply and demand of shares outstanding. Look at it this way, if there was 1 share of stock for Atvi, it would cost 13.5 billion dollars...if there were 10 shares, 1.3 billion each and if there where say 1.3 billion shares of Atvi (which their are) then it would be around 10-11 dollars each. My pet peve is when people say oh wow that stock is 200 bucks a share like apple...then say msft is only 28 bucks...but peel back the layers and find oh msft is worth more than apple..
ERTS has $4/share more in cash, however ATVI has the cash flow going for it.
The difference is ERTS has a far greater potential for growth. They're investing in new models, fighting used games, developing new IP, and supporting this stock price with nothing really breaking out for them. So if something does break out in sales, earnings could explode upwards because of their low share count. I'm not saying how likely that is, merely that it's possible.
OTOH, there's no chance of ATVI's earnings exploding upwards. Growth will be a struggle from this point. They're only looking OK on EPS due to buybacks. Their three pillars are all in varying stages of trouble - GH crashing, WoW flat, IW problems. They seem to have cut other new IP development. They would need an unannounced 5M seller just to add 10c to eps. Where's that going to come from? And what if the next CoD "only" sells 10M units, or misses the FY? That would cut EPS by 15 cents! Again I'm not saying it's likely, but the risk is there.
I think both are about fairly valued here, but I have a slight preference for ERTS due to their diversity. ATVI carries a lot of risk with most of their profits coming from a few mature IP's. That was ERTS' a few years ago with Sims and NFS, but IP's tend to fade over time. The pendulum may be swinging back in ERTS' favor from ATVI.
"The difference is ERTS has a far greater potential for growth"
Disagree. ERTS Revenue for CY09 were 4.2Billion.
For CY10, Analysts expect 4.1Billion,
For CY11, Analysts expect 3.7Billion.
It'a a declining revenue... But they may revise as time goes by. who knows...
ATVI on the other hand, CY09 4.2Billion rev.
CY10, expected to be 4.5Billion,
CY11, expected to be 4.8Billion.
It's growing here.
Hard to say.. It's a matter of your entry IMO. if you get in at $9s holding hoping for a pop is fine imo...
I don't agree that the outstanding shares mean it won't go up as fast, Pfizer has 8 billion shares outstanding and it went from 13 to 20 this year, it is all about earnings and sentiment, sentiment is low but that may change with earnings and new releases.
ERTS lowers its next year guidance yet again. Now it thinks it's gonna have non gaap revenue of 3.65-3.90Bil vs average estimate of 4.07bil, and EPS of .50-.70 vs the analysts' estimate of .74.
ERTS closed at 17.49, has 6.19 per share in cash, if you were to take away the cash and assume .60EPS ( halfway between .50 and .70 that they're guiding towards) you get a forward p/e of 18.83.
ATVI closed at 10.16, has 2.15 per share in cash, if you were to take the cash away it's trading at 10.82 p/e (based on current analysts' estimates of .74)
18.83 P/E vs 10.82 P/E ....one day investors will wake up and close this gap, ERTS needs to come down or ATVI needs to go up, ...perhaps both will happen so the valuation gap gets closed sooner rather than later.
"The forecast (ERTS') was also disappointing for the full 2011 fiscal year, ending next March. The company said it expects earnings between 50-70 cents a share with revenue between $3.65 billion and $3.9 billion on a non-GAAP basis.
Analysts were expecting earnings of 74 cents a share on revenue of $4.07 billion for the period, according to consensus forecasts. "
While I wish we could look at share price, it's not that easy.
ATVI has alot more shares out than ERTS. Looks like ERTS has 320 million shares compared to 1.3 Billion for ATVI. (Based on market cap/share price). For ATVI to go up to 16 , the market cap would have to increase 8 billion.
That's alot in this environment.
Don't get me wrong I hope it does.
ERTS has more cash per share than ATVI, you're absolutely right. 6.18 vs 2.15 extra 4$ per share, but even if we were to strip the cash from our P/E valuations, it still trades 2$ more expensive than ATVI at the moment. ...and ATVI is generating cash at a faster pace than ERTS, laying off workers, shutting down studious costs lots of $, + I wouldn't be surprised to see ERTS lose $ during the weaker non-holiday quaeters.