Strong Results/Guidance for EA, Though R&D Spending a Concern; Reiterate Strong Buy

5/14 - "Q4 results were above guidance and consensus estimates...Management guided to dramatic revenue growth and modest EPS growth in FY:09, expecting a surprising 30% increase in R&D spending. The company expects pro forma revenues of $5.0 – 5.3 billion and pro forma EPS of $1.30 – 1.70, compared to consensus estimates of $4.6 billion and $1.74, respectively...We are raising our pro forma revenue estimate to $5.25 billion from $4.6 billion, and are maintaining our pro forma EPS estimate of $1.75. We are modeling significantly higher R&D expense than we had previously."

"EA’s share price has lagged its peers over the last four years, with virtually no appreciation. We believe that this is attributable to investor concern about steady growth of R&D spending without corresponding revenue growth...We expect EA shares to appreciate when investors believe that the com...