Piper Jaffray upgrades Electronics Boutique (ELBO) to outperform from market perform.
Analyst Anthony Gikas says his old rating is based on valuation, not fundamentals. He thinks EB Games is well positioned for long-term growth opportunity in the video game sector.
He expects strong execution, market share gains, new hardware launches, improving productivity, solid demographics, and long-term pricing trends will be positive to the story long-term.
Gikas thinks earnings per share growth over the next three-year period could exceed 20% compound annual growth rate. He views video game specialty retail as a defensive layer of retail that is less vulnerable to change in discretionary spending.
He sees $2.50 fiscal 2006 (ending January) earnings per share and $2.85 fiscal 2007. He raises his $40 target to $50.