Electronic Arts: This Stock Isn't Playing Games

Electronic Arts (ERTS), the maker of the Madden Football series, Tiger Woods PGA, and NBA Live for lack of a better phrase is a slam dunk.

In a bad economy, people cocoon themselves. They stay home. They watch TV. They rent movies. And, they play video games. Electronic Arts (ERTS) is the king of video game makers. Yes we have a variety of platforms to choose from, Playstation (SNE), XBOX 360 (MSFT), the Wii, and of course PC and MAC(AAPL). Guess what ? Electronic Arts makes games for all of them.

EA has a built an annuity with its sports franchise games. Every year they release an update, with new features and most importantly updated rosters. People who play sports games HAVE to buy the update. Its no fun playing a basketball game when the most current player to choose from is Magic Johnson.

The next big catalyst for game makers will be the mobile sector. Mobile gaming will be huge. People want to play while waiting at the doctors office, at the airport, in line at unemployment. The iphone (AAPL) too will become a huge mobile gaming platform.

Get in the game and buy shares of this industry gorilla. It will be back to its 52 weeks highs. Now excuse me while I get back to scoring a touchdown against that 12 year old in Omaha over XBOX LIVE :)

Disclosure: I do own most of the stocks mentioned above. I do trade them from time to time for myself and clients. And I am addicted to XBOX live. I will beat that 12 year old yet.

Comments

[Moby Waller]

In my personal opinion, since EA has gotten near-monopolies on NFL game licenses, etc -- the quality of their sports games has gone downhill -- they do tiny incremental improvements each year instead of being innovative and overhauling completely and creating new ways of playing and new genres

[ChandlerLutz]

Nice Article! I think the sports franchise is quite important to EA, but I honestly don't know anyone who buys an update of the game every year. The number of features on those just aren't drastic enough to warrant purchases by recession conscious consumers. Also, I still don't think that EA has Blockbuster game in the pipeline to really drive sales. Maybe the new video game Spore can save them, but that game has seen numerous delays and since EA is trading at such a high multiple to forward earnings it seems as if a lot of growth is priced into the stock. If the stock becomes super cheap over the summer (definitely less than 25 forward earnings) and the geeks think spore will be as cool as everyone hopes it will be then I will give the company a look...

[Stephjen]

I'm long EA, but the article reads as if it's written by the 12 year old that you're playing against.