Stocks in the News: Electronic Arts, McDonalds, Disney

Posted: May 09, 2013 12:01 AM

Welcome to John Ransom's Stocks In The News, where the headline meets the trendline.

Stocks in the News is produced by Ransom Notes Radio and Goodfellow, LLC. Crista Huff manages Goodfellow LLC, a website that recommends outperforming stocks using fundamental and technical analysis.   

Stock number one is: 

Electronic Arts Inc., (SYMBOL:  EA) and the headline says:

S&P Raises Recommendation on Shares of Electronic Arts to Sell from Strong Sell – Standard & Poor’s Research

After disappointing Wall Street with a fourth quarter earnings miss today, Electronic Arts guided analysts’ estimates much lower for first quarter revenues and losses.  The company is going through a difficult transition as it searches for a new CEO, cuts jobs and expenses, and watches console sales continue to suffer in favor of mobile and online games.

Many Wall Street firms are issuing buy rating on Electronic Arts today, and we think they’re nuts.  The company lost $2.5 billion dollars in recent years, and the stock has never recovered from the 2008 Financial Meltdown.

On March 19, we told investors “With no clear growth plan in place, and no captain steering the ship, ….AVOID ELECTRONIC ARTS”.  We prefer that investors look for stocks in thriving companies in order to minimize risk and maximize capital gains.

Our Ransom Note trendline says:  AVOID ELECTRONIC ARTS.

Stock number two is

McDonald's Corp., (SYMBOL:MCD) and the headline says:

McDonald’s April Store Sales Drop 0.6% on Asia Slowdown – (Bloomberg)

McDonald’s April sales decreased more than expected, hampered by weak global economies, and fear of the bird flu in Asia.  This continues a pattern of weaker U.S. same-store sales reported in February and March.

The company remains solidly profitable, and expects earnings to grow 7-10% per year for the next three years.  The dividend yield is 3.02%, and the PE is 18.

On April 19, we told investors that “the stock will likely trade between $98 and $104 in the very near-term,” which is exactly what it's done.  Watch for continued sideways trading activity.

Our Ransom Note trendline says..... STAY ON THE SIDELINES.

Stock number three is:

Walt Disney Co., (SYMBOL: DIS) and the headline says:

Disney’s Second-Quarter Net Rises 32% as Park Guests Splurge  (Bloomberg)

Walt Disney Co. reported a tremendous second quarter, slightly beating estimates, with earnings up 32% year-over-year.  Successes from the new Cars Land theme park feature, the Disney Fantasy cruise ship, and the movie “Oz the Great and Powerful”  contributed to strong growth.

Analysts expect Disney’s earnings to grow 13-15% per year for the next three years.  The dividend yield is 1.15% and the PE is 19.

The stock price has more than doubled in the last 20 months, and the chart is overextended.  New investors should consider buying on a pullback.

Our Ransom Note trendline says....  BUY DISNEY BELOW $62.