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marc on 16 January 2010
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NJ5 said:
marc said:
EA is insanely overvalued right now. Its market value is still hovering around $5.5 billion and a P/E of around 30 based on their old profitable quarters never mind that they are losing $1b a quarter right now.

IMO, the price is much to high which is why no one is approaching them. Many on wall street actually hyped up EA on a buyout early in 2009 and it has remained high on that speculation. If it were not for hype the company would be around $10/share with a value of around $3b which is still more than I would pay for them.

Nope the best deal on wall street was TTWO and Icahn jumped all over it pushing the price up over $10 a share. THQ is still somewhat reasonably priced but they don't have as many solid IP's. Blizzard of course was bought out by Activision and will probably be run to the ground in the next 4-5 years.

If I were one of the big guys, I would create my own studios. There is nothing worth buying right now.

If you go by PE I think almost all companies are terribly overvalued right now... Bernanke's printing press and all.

 

This is why I use a historical earnings as a guide. Certainly, PE alone is a bad basis because none of these companies even have a PE because they all recorded losses the last few quarters but PE remains a very useful indicator of value. In terms of EA, their stock has always sold significantly higher than what it should based purely on hype. First it was going to mint gold thanks to its football franchise (didnt happen). Then it was going to print platinum bills because it was a "video game" company with endless growth potential. Now its all about a buyout that has not materialized in even a glimmer of interest by anyone. EA has one of the best PR and hype departments in the stock market which is why I believe that are overvalued.

On that note, other companies are actually a good value in comparison to EA. THQ is extremely underrated imho. Look at their sales last month compared to EA. EA+EAsports = 1,227,000. THQ = 864,000. EA has a market value of $5.5 BILLION. THQ has a market value of $352 million... TTWO was a good buy a few weeks ago when it dropped below $8 a share but Mr. Icahn jumped all over it like bear on honey pushing it back up over $10. Even at $10, TTWO has a value of under $900 million. You could buy both TTWO & THQ for about 30% of the cost of EA. Lots of good stuff out there for those who are interested in values.