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After the Rally (?): Revisiting ERTS and TTWO


The charts are ambiguous to partly bullish... will the news flow justify the bounce?


When last we checked in with the charts of Take-Two (TTWO: NASDAQ) and Electronic Arts (ERTS: NASDAQ) both stocks were at the tail-ends of rather sharp declines. Both stocks held the support levels we high-lighted and moved up sharply (along with the rest of the markets, of course).

The question, as always, is what the stocks do next. On the fundamental side, TTWO's "Grand Theft Auto: San Andreas" has seen its moment in the sun set with tonight's release of "Halo2" for the XBox. Should the latter title steal some incremental buzz at the expense of the PS2/ GTA it could be offer reason to pause for the TTWO bulls.

Mondays are sales data day for software. Of note in last week's data was that ESPN/ TTWO/ Sega's basketball title was #1 for the Xbox; bumping ERTS' previously unassailable NBA title from the top-5 entirely. The Boo case is that the value-priced sports games are nearly margin-less for TTWO (it's all about next-gen marketshare) and a pending disaster for ERTS, who had actually released their NBA title ahead of schedule to beat ESPN to market.

With no more big titles in the '04 release queue for either company there is little room to make-up for any potential short-falls in the critical holiday season. If ERTS is forced to 'fess up to increasing marketing spend and price cuts beyond expectations (there's some reason to believe they were doing a little spinnin' on that point in their last call) it could usher in the seemingly annual sell-off in this space.

Keep your eyes on the charts (both sales and stock price); I'll be watching 'em with you and update any views as the flow merits.

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positions in ERTS and TTWO

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