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Electronic Arts (ERTS) continues to disappoint, this time giving a big fat profit warning for 2009. As I've written before, they have no one to blame but themselves. There are winners and losers in every video game cycle, and this time EA is a loser. The 3-month chart tells the story (click chart to enlarge):
Of course, all of them are "losers" according to stock price, but ERTS has been especially bad, only outdone by dismal THQ (THQI), whose survival is in question. On a relative basis, the winners are Nintendo (NTDOY) and Activision (ATVI). Nintendo Wii sales more than doubled over the Thanksgiving holiday week, and Activision is doing a nice job diversifying its business into online gaming with the Blizzard combination.
Speculation is growing that EA will be taken over. The Wall Street Journal's "Heard On The Street" column suggested that Disney (DIS) might make a bid, and it makes sense to me. Disney owns ESPN, and EA specializes in sports games. Very interesting. But this is nothing more than a rumor.
Barron's has a good rundown of analyst comments following the profit warning today. Speaking of Barron's, the thoroughly enjoyable publication suggested it was Game On for Electronic Arts' Shares just before this profit warning. Ouch! I don't mean to single them out, it's been a tough market for everyone, myself included. Let's face it, reasoned arguments for owning stocks have not been working in this environment--we are now in the realm of the technician and the psychologist. And on that basis, I find myself interested in ERTS. Today was a 52-week low on huge "capitulation" type volume (6 times more than usual), and perhaps sellers will become exhausted in a few days. On a move back down to the 15s, I might consider a speculative shot and hope that the House of Mouse comes to the rescue...
Disclosure: No position in ERTS or DIS. Long NTDOY and ATVI.
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