Credit Suisse raises Electronic Arts (ERTS) Q4 revenue and PF-EPS estimates to $920 million and $0.02 respectively. Cites accelerating hardware sales and a “strong release schedule”:
We expect Electronic Arts to report Q4’08 results ahead of consensus. We are increasing our Q4’08 estimate to $920M in sales and PF-EPS of $0.02, above consensus of $828M/$0.00 due to strong sales of Rock Band, Army of Two and Burnout Paradise during the quarter. As a result, our FY’08 EPS estimate goes from $0.97 to $0.98. We expect operating margin for FY’08 will expand to 4.6% from 2.7% in the prior year. Looking at the most recent NPD data, we forecast combined US/UK sell-through growth of 60% y/y for the quarter, (+15% y/y excluding Rock Band).
We continue to believe that ERTS will outperform due to a strong industry environment, a 20% larger, and what we think is a significantly higher quality, release schedule and a greater focus on streamlining the development process and cost structure. With the stock trading at 21x our FY 2010 estimate, we believe there is considerable upside to owning the stock at these levels.
CS also likes Activision (ATVI). Based on continued strength from blockbusters Guitar Hero 3 and Call of Duty 4, they’re boosting Q4 Revenue and PF-EPS estimates to $410 million and $0.07 from $360 million and $0.05 respectively. More highlights:
We continue to believe Activision is extremely well positioned to benefit from dramatic growth in the video game industry driven by a new console cycle, new forms of game play, and new business models. In spite of the tough comps in FY’09, we believe the strength of core franchises, the attractive implied multiple of the combined company and the protection offered by the tender, far outweigh those concerns. We are reiterating our Outperform rating and price target of $33.
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