"While I've watched video game maker Electronic Arts (NASDAQ: ERTS) for many years, I've never felt it was cheap," says growth stock specialist Nate Pile.
In his Nate's Notes, he now says, "I am thrilled to see the stock price finally experience the sort of pullback that justifies a buy rating; indeed, I wasn't interested at $50 four months ago, but at $17 today, I can't help but get excited."
"Over the years, Electronic Arts has amassed an impressive library of titles. In particular, you may be familiar with the entire Sims collection, as well as the company's extensive lineup of sports games (including Madden NFL and Tiger Woods PGA Tour, for example).
"In addition, Spore is a recently introduced hit, and some other titles you may be familiar with (or at least seen in TV commercials) include Need For Speed, Medal of Honor, and Rock Band.
"Yes, it is true that EA has seen its stock tumble badly over the past six months in response to the slowing economy (and yes, it is true that there a number of other major players in the industry that were not around back in 1990).
"Not only is the video game industry holding up far better than many others that have also been hit by a slowdown in consumer spending, the company is sitting on close to $2.5 billion in cash, has no debt, and is still widely regarded as one of the premier game producers in the industry.
"Of course, economic slowdown almost always forces companies to restructure and refocus their efforts, and Electronic Arts no exception.
"The company recently announced that it is lowering its near-term sales guidance, will be laying off roughly 6% of its work force, and will be 'taking steps to reduce its cost structure and improve the profitability of its business.'
"And, while it is still too early to know whetherthe changes underway will be sufficient to attract investors back to the stock in the quarters ahead, I believe that the current price represents an attractive entry point to begin building a new position in our portfolios.
"So, with the caveat that it may take another couple of months before we start to get more aggressive with our purchases. For now, ERTS is considered a buy under $20 and a strong buy under $16."
Steven Halpern's TheStockAdvisors.com offers a daily look at the latest market commentary and favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.
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