ERTS Warns Of Weak Video Game Sales

Analyst Todd Mitchell of Kaufman Brothers maintains his "buy" rating on Electronic Arts (NASDAQ: ERTS)(FREE stock trend analysis), while reducing his estimates for the company. The target price for ERTS is set to $23.

Electronic Arts has announced that its videogame software sales during November had been weaker than expectations. The analyst expects ERTS to be able to meet the low end of its revenue and EPS guidance for 2010, supported by lower operating expenses and a mix shift. Investors should focus on operating leverage rather than top-line growth, Kaufman Brothers adds.

There are many factors, such as record-high teen unemployment, the proliferation of lower-cost digital alternatives, a significant drop in the music genre and tighter inventory management, that have been adversely affecting the sales of the videogame industry. Kaufman Brothers has reduced its EPS estimate for FY10 from $0.75 to $0.70.