Based on some personal research, and that of UBS/Wedbush/Piper/RBC Dain analysts, I would say a year-end target of $65-$67 is very fair (some analysts say $75+, but I think that's overly optimistic). The initial surge of volume this morning propelled ERTS from an open below $57 to almost $59. The volume then dropped off heavily and it's drifiting lower. Obviously that could be taken as a short-term bullish sign, but time will tell. The same thing happened with NVDA last year (check the charts) and I made a killing (I'm still long).
At this point, I would be most pleased if the puts simply expired. But, the long-term outlook on ERTS is very positive and I've been waiting for it to drop for a while so I could buy in at a good price. They just signed an exclusive contract with the NFL, thus cutting out competition--that is huge. The Sony PSP will be out this week, and ERTS is creating something like 14 games for it the first year alone. Trust me--the PSP is going to be big (albeit expensive). I follow all the video gaming forums, etc, and I learn a lot just listening to those guys. I was able to ride AKLM all the way down (on the short-side) because their much-hyped game called "Turok" came out (it was supposed to save them financially), and the gamers immediately thought it was horrible. Sometimes it's that easy. ERTS may buy Ubisoft, which would be ideal. Check out a chart of Ubisoft (UBSFF) and you'll see that ERTS has been accumulating shares. I almost bought Ubisoft at $19, but I thought it was going lower. Oh well.
http://www.elitetrader.com/vb/showthread.php?s=&postid=686687#post686687 did you put 100% of your capital on one single trade again? if the answer is yes, two big thumbs down to your trade.
I just want to caution folks regarding risk management. For some reason, options traders seem to get intoxicated with the idea of selling premium (and putting on significant size in relation to the account value). Seems to me that they get lulled into a false sense of security. After all it works quite well until you run into a vol spike. Just want to go on record. As my broker used to say "its your account". I do wish you all good luck.
Nope, just sold ten contracts, and I'll buy them back if ERTS drops below $54.80 (200-day MA). RIMM scared me straight--it may have worked out ok in the end, but what if RIMM would have gapped DOWN ten points. Ouch. Lesson learned.
Sure, throw NVDA in my face. Their fundamentals had deteriorated to a point where I could not hold my long position any longer. Of course, they have recovered quite well since then. I have not studied ERTS much, so my response should be taken with the appropriate amount of salt. A price of $65 looks reasonable assuming they can eek out some revenue growth in 2005. On the other hand, their recent guidance goof makes me a little skeptical. ERTS will be a stock to watch if they are still trading in the $50's and earnings growth starts looking like it will consistently exceed 10%.
LOL--Didn't mean to bring up bad memories (NVDA)! Sorry. Your concerns are legitimate, but let me attempt to alleviate them a bit. In '05, they still expect rev growth of 6%+, which isn't great, but at least it's positive. They attribute the earnings shortfall to lower catalog sales, partially due to Sony having significant trouble providing enough PS2s during the holiday season. Also, it's worth mentioning that many kids/young adults are waiting for the new PS3/Xbox2 before they plow more cash into software. The demand for software always drops off before the new hardware cycle begins--it's like clockwork. ERTS CEO (Probst) said no executives will receive any type of bonus this year--that speaks volumes regarding their discipline. Lastly, they believe sustainable top-line growth of 8%-12% is "doable."
crevalle wrote:This stock is oversold IMO (RSI, etc), and the fundamentals are still very strong. I follow video game stocks quite closely, and I would be pleased to own ERTS at $55 if I am exercised. I love these situations. It showed strength on the gap-down this morning as well. Turn your short puts into a calendar, buy the May 55 puts.
This was actually a good play except for the FED announcement. Everyone expected the quarter point increase but didn't expect the "inflation worries" comment.
I really would never trust an indicator like RSI on an overnight drop like that -- the stock could open $10 lower with everyone still yet to sell. Oversold means little in this kind of move I think.