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Electronic Arts (ERTS) On The Way Up

Posted on Thursday, Aug 9th 2007

By Frank Lara, Guest Author

If John Welch is building a new Electronic Arts then how is the real Electronic Arts Inc. (NASDAQ:ERTS) doing and is it worth your time and money for a potential investment opportunity?

ERTSThe quick answer – they are worth your attention.

Electronic Arts is the big daddy of the gaming sector with a $16.9 billion market cap, they are the world’s biggest video game publisher. This month ERTS posted a smaller-than-expected quarterly loss due to a boost from hits such as its latest “Harry Potter” title.

Electronic Arts also raised its revenue forecast for 2007, citing ‘strong buzz’ for upcoming music game “Rock Band,” which it is distributing on behalf of MTV. ERTS raised its full-year revenue forecast by $50 million, to between $3.65 billion and $3.85 million. Wall Street had been estimating revenue of $3.69 billion.

Executive Vice President and Chief Operating Officer, John Schappert cashed in last Friday (8/3) when he exercised options for $48.79 a piece and then sold all of them the same day for $51 to $51.50 a piece.

Here’s a breakdown of his one day activity and let’s just use $51.25 a share to make it all simple:


You can’t blame the guy for selling out and pocketing $70K in one day, but what kind of message does that send to shareholders?

Why not sell your shares later in the year if you know you are going to continue to have a stellar year? Why not double your money? Now the guy didn’t make millions, so I don’t think shareholders should be cashing out their shares, but take some off the table? Definitely.

My fellow Americans, there is nothing wrong with taking some chips off the table, if you don’t cash out now and then, you can end up with nothing. If John Schapper had walked away with several million dollars, I would be preaching a different story.

It’s going to be a good year for Electronic Arts, and now that Grand Theft Auto IV has been delayed until 2008 by Take-Two (TTWO) , it’s game on for ERTS. Electronic Arts said it plans to debut 10 new properties in the rest of fiscal 2008 which should translate to steady earnings.

maddenSo with their stock trading near the high end of its 52-week range is now the time to really be looking at picking up ERTS shares?

This stock is a slow mover, but it’s headed up, so is the entire video game sector. Just yesterday Microsoft Corp. confirmed that it is dropping the price of the Xbox 360 video game console to $350. Which means consumers will be buying up Madden NFL 08 and other EA titles and adding to ERTS revenue numbers.

Frank Lara Jr.

Article written by: Frank Lara Jr.
Article posted on: August 7th, 2007

Disclaimer: The Author does not have any positions in ERTS.

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