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Wall Street, California | SECTOR SPOTLIGHT

To Play Video-Game Stocks, Look for Hit Machines

June 09, 1998|JAMES PELTZ

Midway Games Inc. (MWY), maker of the gory but popular "Mortal Kombat" as well as "Cruis'n USA" titles, also gets a nod from Fagin even though the company has disappointed of late. Three weeks ago, Chicago-based Midway said earnings for its fiscal fourth quarter ending June 30 would be well below expectations, and the stock plunged 17% that day alone.

When that happens, "investors turn the stock into a 'show-me' story. Nonetheless, its fundamentals are still strong going into the next fiscal year," Fagin said. Also, Midway followed its lousy earnings report with plans to buy back up to 1 million of its shares over the next year.

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Another game maker that's fighting for investors' respect is Acclaim Entertainment Inc. (AKLM), which is recovering from "two years of huge losses that brought the company to the brink of bankruptcy," according to the Value Line Investment Survey, a stock-research service.

The company, based in Glen Cove, N.Y., has been cutting costs, launching successful games ("NFL Quarterback Club") and paring its losses. But there's questions about whether Acclaim can extend its recovery, and analysts' ratings toward the stock are decidedly mixed.

One other game stock has garnered attention recently: Eidos (EIDSY), a British company that makes the hit "Tomb Raider" games featuring heroine Lara Croft. But take note: The stock is rather thinly traded, which makes its price moves more volatile, and Eidos faces the challenge of proving that it's more than a one-game company.

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Times staff writer James F. Peltz can be reached at james.peltz@latimes.com.

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Game Players

It's been a mixed bag for video game stocks this year, with some amply rewarding their investors and others proving major disappointments even as the overall industry remains strong. Here are some of the leading game producers:

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Ticker Monday % change Stock symbol close from 12/31 P/E* 7th Level SEVL $4.31 +156% 43 Acclaim Entertainment AKLM 4.88 +35 24 GT Interactive GTIS 8.31 +30 16 Electronic Arts ERTS 45.25 +20 28 THQ THQI 22.81 --1 11 Midway Games MWY 14.13 --22 13 Broderbund Software BROD 17.63 --31 20 Activision ATVI 9.63 --46 16 Standard & Poor's 500 +15% 23

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* Price-to-earnings multiple based on expected 1998 earnings per share.

Source: Bloomberg News

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