Southwest Securities Downgrades Electronics Boutique

Analyst Arvind Bhatia says hardware shortages led to a drop-off in hardware sales and tie-in software sales

Southwest Securities downgrades Electronics Boutique (ELBO ) to long term buy from strong buy.

Analyst Arvind Bhatia says he lowers estimates for Electronics Boutique's holiday season (November/December) sales, which he expects to be reported early next week. He now sees 1% same-store sales growth during holiday period, vs. a previous estimate of 5.0%.

He says hardware shortages during the holiday season were more severe than anticipated, and have led to a drop-off in hardware sales and tie-in software sales. He also cuts $1.73 fourth-quarter earnings per share estimate to $1.58, and $2.30 fiscal 2005 (ending January) to $2.15.

While Bhatia still believes in the long-term prospects of Electronics Boutique, due to above factors, he cuts his $46 target to $42, which is based on 17 times his fiscal 2006 earnings per share estimate.

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