A Fool Looks Back

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Kicking out the carjacker
Shares of Take-Two Interactive (Nasdaq: TTWO  ) ground harshly into reverse after Electronic Arts (Nasdaq: ERTS  ) announced that it was walking away from buyout negotiations.

Sure, not every company is a perfect match. But I still don't get the market's reaction to the news. Take-Two isn't Yahoo! (Nasdaq: YHOO  ) . It didn't turn down some juicy buyout premium. It wasn't trading at an outlandish multiple. Take-Two's fundamentals have actually improved with every passing month.

That didn't stop the market from giving Take-Two the Microhoo treatment. Down it went, and the heart-wrenchingly rocky market didn't help. However, with Wall Street projections recently inching higher for the company, on the strength of the Grand Theft Auto and BioShock franchises, is there a better value out there on the market?

With analysts expecting Take-Two to earn $2.10 a share this year -- and the stock in the mid-teens -- Take-Two is sporting a 2008 P/E multiple in the single digits. That's not just cheap. To borrow the premise of its flagship auto-theft game, it's a steal.

Briefly in the news
Here's a quick look at some of the other stories that shaped our week.

How the mighty have fallen! VMware (NYSE: VMW  ) became the latest IPO to falter, trading below its initial $29 price from last summer. That certainly didn't seem possible when the virtualization software pioneer was trading in the triple digits shortly after its market debut. Unfortunately, gravity has a funny way of bringing you down when your fundamentals begin cracking.

Shares of Sirius XM Radio (Nasdaq: SIRI  ) hit new five-year lows before bouncing back later in the week. Despite concerns over the company's ability to refinance its debt next year, did the market really think that Sirius would go to zero? Sure, bankruptcy and reorganization may have seemed like a feasible way to get around three huge repayments due next year, but 2009 is also when the company's synergistic fundamentals kick in. Besides, what would it do to subscriber rates if the company did file for Chapter 11 bankruptcy reorganization? Too many people don't know the difference between going bankrupt and going out of business entirely, and Sirius couldn't suffer that kind of misunderstanding.

What have you done, AIG (NYSE: AIG  ) ? The troubled insurer became the latest company to welcome the government's extended hand. I'm not sure how the government decides who it catches and who it doesn't. That Holden Caulfield outfit just doesn't fit Uncle Sam right.

Until next week, I remain,
Rick Munarriz

VMware and Take-Two Interactive are Motley Fool Rule Breakers picks. Electronic Arts is a Motley Fool Stock Advisor recommendation. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz recommends windshield-wiper fluid when trying to look back. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. He does not own shares in any of the stocks in this story. The Fool has a disclosure policy.

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  • Report this Comment On September 21, 2008, at 10:01 AM, CharlieScottsdal wrote:

    I think you are right on about SiriusXM. The synergistic fundatmentals should kick in and also I believe a larger percentage of new cars in 2009 will have SiriusXM Factory installed radios

    I feel that the market is ignoring the potential for international expansion.

    Sirius Canada has been very successful. China is ripe for sirius radio (large rural area and expotential auto expansion) . Partnership with local Chinese radio stations and have government cooperation, probably easier then the FCC.

    Sirius has the potential through satellite technology to have the whole world to expand their product

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