Deutsche Bank Maintains Sell on Electronic Arts

Deutsche Bank is out with its report today on Electronic Arts ERTS, maintaining Sell after ERTS announced its acquisition of PopCap Games. In a note to clients, Deutsche Bank writes, "While strategically PopCap's IP holds L/Tpotential, we think investors should focus on three key themes post last night's announcement, including: (1) EA paid 36x CY11 EBIT and 20x CY12 EBIT (vs. EA at 21x FY12/CY11 EBIT), representing a lofty multiple for a 35% growth rate. (2) Investors have expected share buybacks from a capital allocation standpoint, but it now seems EA is moving back to M&A again. (3) While June qtr was better vs. ests, there seems to be little flow-through to FY12, suggesting that core business profit target need to be lowered." Deutsche Bank maintains a $15 PT on ERTS. Shares of ERTS closed Tuesday at $24.17, down 0.90% from Monday's close.