Solid Outlook on Comstock

We reiterate our Buy rating on Comstock Resources, Inc. (CRK), following the energy company's strong March-quarter results and solid outlook. While we expect the sale of the Bois d Arc unit to Stone Energy Corp. (SGY) to streamline Comstock's operations and position it as a pure-play onshore natural gas producer, its strong acreage presence in Haynesville Shale provides an attractive reserve potential.

Given the company's ramped-up drilling plans, we expect volumes to grow about 20 percent this year. The sale of Bois d Arc Energy is also expected to improve Comstock's profitability and risk profile by eliminating offshore dry hole exploration expenses.

We raise our target price on the stock to $65 from $55 to reflect an updated net asset value estimate. In terms of growth potential, Comstock's Haynesville Shale acreage is extremely prospective, providing reserve potential in excess of its current, proved reserves. Using these parameters, our per share net asset value estimate comes to $66.84. Comstock shares currently trade at roughly 82% of our net asset value estimate, which highlights the stock's attractive value proposition.

Cutting Buy-Rated GameStop to $65

We reiterate our Buy rating on GameStop (GME), as we believe the biggest U.S. specialty video-game retailer has numerous competitive advantages that will enable it to deliver strong growth for the next several years. The company reported better-than-expected results and raised its outlook for 2008 and 2009, earlier this week.

Video-game sales continue to be an island of strength amid a soft retail environment, and we expect industry growth trends to remain robust for the next few years. We boost our estimates on GameStop to $2.40 from $2.29 a share for 2008 and to $2.98 from $2.87 a share for 2009, as we believe that the company will benefit a great deal from the strong industry trends.

On the flip-side, we are cutting our six-month target price on the stock to $60 from $65. GME shares are trading at 20.4x our 2008 EPS and 16.4x 2009 EPS estimate. We think the company's robust growth justifies its premium multiple but the market may not be willing to award GME a premium multiple going forward. This is because the company's growth, while still quite robust, is trending down, and there is the risk that a weak consumer-spending environment could work its way into video games.