Electronic Arts (EA) somehow has survived, and thrived. I wrote in late 2011 that EA was facing some challenging competition, and that, “It’s a “buy” for aggressive investors, while others may want to wait for a pullback to increase their margin of safety.” If you were aggressive and listened to me, you have a 140% return.
EA stayed on top of its game, so to speak, and is now growing EPS at a 23% long term rate according to analysts. Earnings for the period ending in March of 2015 are expected to be $1.89 per share, meaning fair value is somewhere around $43. The stock trades at $36.76, so there’s room to run. The balance sheet remains strong, with $1.78 billion in cash offset by only $580 million in debt. In fact, that’s $4 per share in cash, meaning the effective stock price is around $33.
As of this writing, Lawrence Meyers did not hold a position in any of the aforementioned securities. He is president of Asymmetrical Media Strategies, a crisis PR firm, and PDL Broker, Inc., which brokers financing, strategic investments and distressed asset purchases between private equity firms and businesses. He also has written two books and blogs about public policy, journalistic integrity, popular culture, and world affairs. Contact him at firstname.lastname@example.org and follow his tweets at @ichabodscranium.