Electronic Arts (ERTS) 53.01 -1.51: Excluding goodwill, non-cash and one-time charges, Electronic Arts posted a Q4 pro forma consolidated loss of $0.09 per share, $0.05 narrower than the consensus estimate, and versus an $0.08 per share profit in the yr-ago period. Consolidated net revenues jumped 4% to $307.3 mln. Needless to say, those aren't exactly blockbuster results for an industry leader that trades at 76.0x est. FY02 earnings. However, the market has cut ERTS some slack as followers of the entertainment software industry recognize that better times are in the offing. That optimism is predicated on the release of new gaming consoles from Microsoft and Nintendo later this year, and a larger installed base of Sony's popular PlayStation 2, that are expected to lead to a noticeable acceleration in software sales beginning around the holiday season. Unfortunately, that impending boom has necessitated an interim bust in the industry as game players have cut back on their purchases of current consoles, such as PlayStation and Nintendo 64, in anticipation of the release of next generation console systems. That was a driving factor behind ERTS's lackluster Q4 results, but in due time, the yr/yr comparisons should begin to look much better. ERTS indicated that it is excited about the market opportunity in 2H01 since it expects strong growth from PlayStation 2-- an encouraging expectation considering ERTS achieved a 40% share of that market in Q4. On its conference call, ERTS said it expects FY02 sales, excluding its EA.com business, to be up in the mid-teens. Again, that may not sound too spectacular, but the positive growth is worth noting since competitor, Activision (ATVI 28.10 -1.50), recently said it expects FY02 sales to be flat to down slightly. Over the near-term, Briefing.com expects ERTS's valuation will be a restraining influence, but since it is clear ERTS is ideally situated to capitalize on the popularity of the new consoles, we would view pullbacks of 15-20% as a buying opportunity.-- Patrick J. O'Hare, Briefing.com
-----------------------
I think ERTS is heading to 30s longer term. |
