Electronic Arts’ executives have been aggressively selling their stock , with COO Peter Moore having sold 100,000 shares (half of his holdings), Executive Vice President Patrick Soderlund selling 36,133 shares, which are all of his holdings, and General Counsel Stephen Bene selling 7,771 shares, which are all of his holdings of class D shares. Investors may want to consider following EA executives and selling their shares into the strength. Sophisticated investors may consider short-selling the shares.
Let us start by looking at the annotated chart.
Please click here for the annotated chart.
As the chart shows, shares gapped open on much-better-than-expected earnings. Electronic Arts EA reported earnings per share (EPS) of $0.48 vs. consensus of $0.11; revenue of $914 million vs. consensus of $812 million. If this was not enough, the company projected higher. EA sees full-year 2015 EPS of $1.85 vs. consensus of $1.52; revenue of $4.1 billion vs. a consensus of $4.1 billion.
Big beat may be a one-time event
The big beat by Electronic Arts may be a one-time event. The company has benefited from the introduction of Xbox One from Microsoft MSFT and PS4 from Sony SNE . There is a pent-up demand for games for these new consoles. Once the pent-up demand is satisfied, the more normalized demand may return.
Trading mechanics
The rise in the stock is exaggerated by the simple fact that 26.31 million shares of the company were sold short. A short-squeeze is partly responsible for the rise in the stock. After the initial rise, the stock has held up because until Monday, the stock was hard to borrow, this means that new short positions were hard to establish…Read more at MarketWatch