Lazard: March Sales Flat On Short Nintendo Supply

In his latest note to investors, Lazard Capital Markets' Colin Sebastian expects flat sales in NPD's March software sales results, with strong sales of God of War II, GRAW 2 and Guitar Hero II offset by short Wii and DS supplies. "On a year-over-year basis," said Sebastian, "our 'back-of-the-envelope' analysis suggests console and handheld software sales may be flat in March, with incremental sales of next-generation products largely offset by declining older generation products and short supplies of Nintendo’s Wii and DS platforms." Sebastian expects Sony, Activision, and Electronic Arts will be top performers for the month, with software sales will be driven by God of War II, GRAW 2, Guitar Hero II and Def Jam Icon amongst others. Looking specifically at Activision, Sebastian says a solid monthly performance up 20 percent will be carried mostly on catalog sales (primarily the PS2's Guitar Hero II and continuing sales of Call of Duty 3), with the Xbox 360 release of Guitar Hero II having launched on April 3rd. "At this point," said Sebastian, "we expect 4Q (March) results to be in line with or slightly ahead of our recently raised revenue and EPS estimates. We also continue to expect a robust lineup of new Activision titles in F2008, including sequels to key movie-based franchises Spider-Man and Shrek, as well as core franchises Tony Hawk and Call of Duty, and new licensed titles Transformers and Bee Movie." Turning to Electronic Arts, Lazard expects sell-through to be down 20 percent, despite recent next-gen releases of Def Jam Icon, Tiger Woods and Godfather, and that EA might have two to three of the top 10 Wii titles for the month as EA turns more heavily toward Nintendo's latest console. Said Sebastian, "We also note our retail checks indicate PC titles Command & Conquer 3 and The Sims Seasons are selling well, which is not reflected in our console sales estimates. We expect in-line 4Q (March) results with the potential for conservative initial F2008 guidance. However, we continue to believe a strengthening product lineup in F2008 should lead to a year of solid growth and margin expansion for Electronic Arts." Finally, looking at THQ, Sebastian says sales will be down just slightly over 2006 with few console releases across the month of March. The publisher's Supreme Commander has done quite well, according to Lazard's retail checks, though its post-apocalyptic FPS STALKER, says the analyst, "does not appear to be a top PC title." "We expect solid 4Q results for THQ with the potential for upside to our estimates," said Sebastian. "Following a very strong 2006, we expect another year of solid growth in 2007, including new titles Frontlines Fuel of War and Ratatouille, as well as sequels to franchises WWE Smackdown, Juiced, Stuntman, Cars and Nickelodeon titles."