Merrill Adds Coverage of Electronics Boutique

Analyst Peter Caruso says the upcoming video game cycle appears more promising than any other

Merrill Lynch initiated coverage of Electronics Boutique (ELBO ) with near-term and long-term buy.

Analyst Peter Caruso says his buy rating is based on five reasons: an above-average growth opportunity has limted GDP risk, which is atypical for a retailer, the company has maximized profitability in all video games cycles in the past, the upcoming video game cycle appears more promising than any other; the portion of market share and profits are insulated from discount-store competition, and the investment payback cycle on aggressive new-store growth lies immediately ahead.

Caruso sees $0.87 fiscal 2002 (Jan.) EPS, and $1.28 EPS for fiscal 2003. He also sees $1.70 fiscal 2002 cash flow per share, and $2.30 for fiscal 2003. Caruso set a $50 target.