Electronics Boutique (ELBO) Message Board

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Technology Stocks : Electronics Boutique (ELBO)

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To: ratherbelong who wrote (735)	8/24/2000 6:29:00 PM
From: Mad2	Read Replies (1) of 779

RBL, I agree with you wholeheartedly. The sell off in May was compounded by the skittishness (fear is a better word), worries of a very dissapointing 2nd qtr (turned out benign) and of course the complications arising out of the failed bid for funco (a deal I didn't like as the price ran up . These three elements resulted in a highly oversold situation that culminated with the warning on 2nd qtr earnings. If one takes out the concern about soft sales ahead of PSII and awards ELBO a P/E of 15 (argument exists for 20) on the premise that they demonstrate the ability (through new store openings) to grow 15% (eg 20%) per year then we arrive at a fair value of $22.5/share (15X$1.5/share). All in all I view the rise of the past 2 months as regaining lost ground from the mentioned events. I might add that in the midst of the low short interest had climbed to around 300, a pretty high number given the float on this issue attributed to the arbitrage on the funco deal. The last cloud was ELBO's warning that pushed them to just under 13. Looking forward we should get some gas from the PSII (Given what Dreamcast did for ELBO the PSII should attract at least as much new interest), which occured around 4-6 weeks ahead of Dreamcast. I'm not expecting PSII to rock earnings much above expectations, however as hardware margins are poor and ELBO's allocation won't be what we would like (I think they got around 15-20% of Dreamcast and from what I've seen they look to get around 10% of PSII). That said I will view anything over $30/share leading into the launch as a short term selling opportunity, assuming ELBO gets the 10% I infered. ELBO's real story will unfold going into the 4th and beyond as new titles are released and PSII buyers become more interested in games and accessories which ELBO specializes in. I play it as it unfolds, but I may look to flip a bit near the launch (or as earnings release approaches) with the though that we may see a pull back. I'm not good at holding to the top, I tend to get nervous (value buyer charastic) and bail early. In this case however I have >25% position in a taxable account (bought in late April) so I'm going long on that piece. The rest we'll see. ELBO's 4th and 1st/2nd qtrs of next year should be excellent as gamers seek out new titles to play on their toys. Anyway its nice to be in on the ground of what whould be a nice run. Good luck, M2

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