Jim Cramer - Mad MoneyElectronic Arts IncEADON'T BUYFeb 03, 2025

Has a lot of sports franchises, lacking a single hit videogame. He likes its predictability. It has been offered a buyout, and will likely conclude the deal in Q2.

(Note the short timeframe.)  Takeover bid of $210, which should settle in Q2.

The space is doing fantastically well. Great franchises, an absolute money machine. There's a rule to buy software companies when growth + margins = 40 or more. For EA, this number is 94. July 29 report beat on top and bottom and raised guidance.

(Note the short timeframe.)  Chose it as a Top Pick because the price was depressed. The most utility-like of the video game companies. Weak on the mobile side. At some point, will probably be taken over, and at a premium.

They have a lot of sports titles. They lost FIFA, but have their own soccer franchise, plus baseball and basketball. Sports are steady as opposed to companies depending on a few hit games. Ultimately, someone will buy them out, like Netflix  or Amazon or Apple, who could pay twice the multiple.

Likes the portfolio, though a bit weak in mobile. Discretionary spend on some titles has been a bit lower. Over the long term, can grow 5-6%. 30% free cashflow margins, enough to buy back 5-6% of shares every year. In-game transactions are 99% gross margins. Yield is 0.6%.

This pick results from his looking at the application layer 12 months down the road. Model training algorithms are already being monetized in healthcare, education, and now sports/entertainment. Investor day last week saw a lot of AI tools. Yield is 0.5%.

12-month price target of $167.50. Buy 1/3 here around $141, $134, and $125.

Video game demand down post Covid.
Has since sold shares.
Unsure on future of video game demand.
Waiting to see prospects for business.