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To: vestor who wrote (21343)	12/3/1998 11:38:00 AM
From: Frederick Langford	Read Replies (1) \| Respond to of 119973

Prudential analyst issue STRONG BUY on ELBO this morning! ---------------------------------- 07:15am EST 3-Dec-98 Prudential Securities (H.G. KATICA 404-842-9202) ELBO ELBO: COMMENTS ON INDUSTRY OUTLOOK; RAISING PRICE TARGET; REITERATE STRONG BUY ELBO: COMMENTS ON THE INDUSTRY OUTLOOK; RAISING PRICE TARGET AND REITERATING STRONG BUY R E S E A R C H N O T E S December 3, 1998 Subject: Electronics Boutique Holdings Corp (ELBO-17 5/8)--OTC OPINION ========= Current: Strong Buy Analyst: Harry G. Katica (404) 842-920 2 RISK: High 12-Month Target Price: $22 ======================================================================= Ind. Div.: --- Yield: --- Shares: 20.2 mil. 52-Wk.Range: 26-7 _______________________________________________________________________ EPS FY Year P/E 1Q 2Q 3Q 4Q Actual 01/98 $ 0.74 $ 0.08 $(0.09) $ 0.02 $ 0.86* Proforma# $ 0.62 $ 0.07 $(0.06) $ 0.03 $ 0.58 Current 01/99 $ 1.03E 17.1X $ 0.11A $(0.02)A $ 0.08A $ 0.77E Proforma# $ 0.91E $ 0.09E $(0.02) $ 0.06E $ 0.76E Current 01/00 $ 1.17E 15.1X * Includes non-recurring income of $0.08 per share after-tax. # Assuming the offering, reorganization, and S-Corp Dividends were completed at the beginning of 1997. ======================================================================= As we enter the crucial Holiday selling season, we would like to make some comments about the industry outlook going into 1999 and beyond. In short, we believe the electronic game industry remains well-positioned for long-term growth and will continue to provide a favorable environment for specialty chains utilizing several different formats. Manufacturers Hope To Add Another Year To The Current Product Cycle. The conventional industry wisdom has been that unit shipments peak four to five years after the introduction of a new technology, suggesting a high point for hardware in 1998 and software in 1999. Sony and Nintendo believe they may be able to push this zenith out one more year by implementing further price cuts on consoles, broadening the core customer base, and adding new titles. Originally priced at $299 in 1995, the Sony PlayStation now retails for $129 and has been accompanied by further discounts for the Christmas season. In the past, market saturation has been reached when price points fell under $100. This experience suggests that manufacturers will drop price points again, probably after Christmas. As a result, unit shipments could meet or exceed the combined 13.5 million estimated for 1998, although dollar sales could be negatively impacted by the lower price point. Software sales, on the other hand, are likely to continue rising in 1999 and into 2000. More Titles With Broader Appeal Should Continue To Lift Software Sales. While video games have historically attracted high-testosterone teenage boys, the industry continues to seek out more females and older customers. Games tied to popular children's movies, such as A Bug's Life and Rugrats, should help this effort. In addition, as the original game player's get older, and still have an interest in playing games, the customer base by definition is getting wider. A greater selection of titles should also spur greater software sales, which represents a greater percentage of sales for specialty stores (mall and off-mall) than big box retailers. There are currently about 1,000 titles available for the Sony PlayStation in Japan, compared to about half that number in the U.S. Furthermore, Nintendo 64 supports only 100 titles in the U.S. and has lagged Sony by about a year in the development of new titles in the current cycle. In turn, 1999 should be another good year for the release of new video game titles. Internet Euphoria Prompts Us To Raise Our Price Target. We are raising our price target from $17 to $22 based on the recent strength in the stock, which has been prompted by a better performance for retail stocks and a growing recognition of Electronic Boutique's activities in Internet commerce. The current target represents a still reasonable P/E of 17 times our 1999 earnings per share estimate. We had reduced the price target from $20 to $17 in early November based on the decline in the stock and had not yet made an adjustment based on current market conditions. Vestor, Loved the NETN YAHOO reference <GGG> Fred