Hardware constraints a potential risk, says LCM analyst

Hardware supply constraints, as well as lower PS2 and Wii software pricing, are potential risks to the market this fall says Lazard Capital Markets analyst Colin Sebastian.

Continued strong demand for the Nintendo Wii, a shift in Xbox 360 unit sales from Q4 into September, and lower price points for the PS3 and PSP may all result in holiday hardware demand outstripping supplies.

Sebastian also noted a downward trend for PS2 and Wii software pricing. New PS2 titles continue to shift to the USD 29 and USD 39 range, with pricing of Wii titles spread from USD 29 to USD 49, "indicative of the more casual nature of many Wii titles."

Xbox 360 and PS3 software pricing remains consistent at USD 59.

Sebastian released his analysis ahead of earnings reports from Activision, EA, and THQ.

He believes that Activision will exceed estimates based upon strong sales of Guitar Hero and catalog titles along with key holiday releases Guitar Hero III and Call of Duty IV.

EA shares, on the other hand, could face "near-term choppiness" due to slow sales of EA Sports titles as well as the shift of Army of Two out of the holiday sales period. Favorable currency exchange and the acquisition of Bioware and Pandemic could offset some of the product headwinds, according to the analyst.

Sebastian is not expecting any surprises from THQ's earnings report, as the company already pre-announced results and revised its guidance for the year.