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.