A report came out today saying that EA has missed the hardware current cycle. The link includes this gem:

However, the report does say that while EA’s projections for the upcoming financial year are “aggressive,” they’re not impossible. Provided they do some more cost-cutting, their revenue target of $4.3 billion might be achieved, and right now, the share rating advice for EA is “neutral.”

Three counterpoints:

1. In my direct experience EA’s “aggressive targets” are practically unreachable. This is a corporate culture thing.
2. Cost cutting will never help achieve a revenue target. In fact, costs should drive revenue higher (more employees, more projects, more sales). Cost cutting will tend to lower revenue, but might help achieve profit targets.
3. “Neutral” ratings are sell ratings. This is partly strategic — why hold when you can flip into growth — and partly because investment banks will almost never issue sell recommendations for the stock of potential clients.

But, none of that is why I sold.

I calculated the growth expectations built into the stock price about a week ago and they were only about 4%. I actually think EA is cheap.

But in this market there are stocks that are far cheaper. Why hold a $20 stock expecting 4% growth when there are $5 stocks out there with 400% upside?