Are Electronic Arts (ERTS) shares undervalued?

Shares of Electronic Arts Inc. (NASDAQ:ERTS) have been stagnant recently, trading between a 52 week range of 14.76 - 23.76. But in mid 2008, shares were trading as high as $50 a share.Does ERTS have what it takes to get it's mojo back?

We think so. Last week, ERTS released Battlefield Bad Company 2, perfect timing as most gamers are getting bored of Modern Warfare 2.

Bad Company 2 became the fastest-selling game of the year, assuming the title previously held by Aliens vs Predator, with 53 per cent of its sales accounted for by the Xbox 360 version.

It has also outperformed the launch figures of the original Battlefield: Bad Company by a ratio of three to one.

Couple that with recent releases Mass Effect 2 and Dante's Inferno, and you have a recipe for a great quarter for ERTS.

On February 9th, the company said it expects only a profit of 2 cents to 6 cents per share excluding unusual items, and revenue of $800 million to $850 million. However, Battlefield Bad Company 2 could help bring in an earnings surprise.

Looking at the chart, ERTS recently hit a Double Bottom - there is not a lot of downside but at least 3 points to the upside, the risk/reward ratio is looking good.