Video Gaming Gains

08/08/2003 12:00 am EST

Focus:

Sherri Parker

Co-Editor, UnDiscovered Stocks

"Last year, for the first time, sales of video games surpassed movie box office tickets revenues," notes Sharon Parker, editor of UnDiscovered Stocks. She picks a video game retailer to play this trend. Meanwhile, Bernie Schaeffer, editor of The Option Advisor, selects a leading video game producer. Here are their picks.

"Last year alone, game software and hardware sales rose $11.7 billion in the US. This year, domestic sales of video game software are expected to leap by 25%. Starting as a mall kiosk in 1977, Electronics Boutique (ELBO NASDAQ) has become is one of the largest specialty retailers in the world, with 1,217 stores. Last year, the company made a decision to bring all its stores with 14 separate brands under a single name – EB Games. This will help cement the company’s branding and bring more visibility to the shares. For the avid gamer, EB Games is a virtual paradise. The stores offer the latest hardware, over 600 accessory products, and more than 1,400 game titles from 60 different vendors. The company has a 26-year track record of continued sales growth and profits. And if booming sales in its retail stores weren’t enough, EB Game’s online business is also rapidly growing. Buy up to $28 per share. My target is $35 in the next 12 to 18 months. Now is the perfect time to jump on board."

The latest featured stock from Bernie Schaeffer is also in the video game market - Electronic Arts (ERTS NASDAQ), which creates video games such as Harry Potter and Lord of the Rings . "On July 23, the company released first-quarter earnings of 12 cents per share, beating its prior guidance for a breakeven quarter. Going forward, the firm said it now expects full-year results to come in between $3.25 and $3.40 per share versus its previous guidance of between $3.15 and $3.25 per share. From a technical perspective, the equity has been one of the strongest stocks in the market. It recently fell back to support at its rising ten-day moving average before reversing course and rising to a new all-time closing high. Despite a solid fundamental and technical picture, sentiment continues to be skewed toward the bearish camp. This sign of rising pessimism in the face of positive news has bearish implications from our contrarian perspective. Traders should target a move up to 97.06 with a stop-loss set for a trade below 80.18."

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