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  • jesterbunk jesterbunk Mar 3, 2010 8:50 PM Flag

    ATVI .77 ERTS .79 yet there is a $6 difference in stock price

    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.

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    • "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...

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