ELECTRONIC ARTS, INC.
INDUSRTY: Software
SECTOR: Entertainment and Games
RECOMMENDATION: Hold
Prepared by:
Yun Ting Lo
Jagdeep Ahluwalia
John Grosso
TABLE OF CONTENTS
Executive Summary Page
3
Business Summary
5
Recent News
7
EA Management Team
7
Significant Relationships
9
SWOT Analysis
10
Industry Analysis
11
Fundamental Analysis
12
Investment Risk Analysis
24
Technical Analysis
27
Valuation Analysis
28
Relative Valuation
32
Conclusion
33
Bibliography
35
Appendices
36
2
EXECUTIVE SUMMARY
Electronic Arts (NASDAQ: ERTS) Quote data by Reuters dated 17‐April‐2006
Last Trade:
54.39
Trade Time:
4:00PM ET
Change:
0.67 (1.22%)
Prev Close:
55.06
Open:
54.85
Bid:
54.44 x 1000
Ask:
54.72 x 100
1y Target Est:
57.29
Day's Range:
54.13 - 55.35
52wk Range:
47.45 - 63.12
Volume:
1,945,109
Avg Vol (3m):
3,258,890
Market Cap:
16.52B
P/E (ttm):
66.65
EPS (ttm):
0.82
Div & Yield:
N/A (N/A)
In Spring 2004, Electronic Arts, Inc., a developer of interactive software games for the PC
and console systems, was selected to be part of Finance 284’s portfolio. This
recommendation was based largely on the Growth potential, the valuation analysis
performed at that time as well as the #1 position the company holds in the marketplace.
However, while the company still holds the #1 position in the marketplace, some recent
developments in the market have prompted our team to conduct an analysis to
determine whether it is prudent to keep this stock in the portfolio.
3
At the time of the initial purchase, there were some more specific reasons for the
purchase recommendation. The team believed, through their analysis, that the company
was w