Besides competing with smaller national rivals like RadioShack Corp. (NYSE: RSH) and GameStop Corp. (NYSE: GME), Best Buy has to slug it out with retailers Amazon.com Inc. (NASDAQ: AMZN), Wal-Mart Stores Inc. (NYSE: WMT), and direct sellers like Apple Inc. (NASDAQ: AAPL).

And while Best Buy touts its increases in sales of mobile phones and other portable devices, it also notes:

Areas of comparable store sales growth in the Domestic segment included tablets and mobile phones within the Computing & Mobile Phones revenue category, eReaders within the Consumer Electronics revenue category and Appliances. These increases were more than offset by comparable store sales declines primarily in notebooks within the Computing and Mobile Phones revenue category, gaming within the Entertainment revenue category, and digital imaging and televisions within the Consumer Electronics revenue category. The Domestic segment online channel revenue grew 20 percent compared to the prior-year period.

Selling more cheaper devices does not make up for lost sales in pricier items, unless a retailer can sell an enormous number. Best Buy can’t do that because there’s simply too much competition from wireless carriers, other retailers, and direct sales.

The company reiterated its full-year adjusted EPS guidance of $3.50-$3.80, in-line with the consensus estimate of $3.59. But weak international sales and declining same-store sales mean that Best Buy will be forced to close more stores, which will hurt revenues and ultimately profits unless the company can really figure out a way to boost its online sales. The outlook is probably not as rosy as the company would like us to think.

Shares are up about 1.6% in the pre-market, but were up as much as 6% at one point. Current price is $18.43 in a 52-week range of $17.53-$32.85. The 52-week low was set yesterday.

Paul Ausick

Compared with the same period a year ago, total sales were down -12.2% and comparable store sales were down -12.5%. In its earnings report the company said:

Despite slower store traffic during the quarter, we achieved our earnings target due primarily to gross margin expansion and positive profit contributions from our pre-owned, mobile and digital businesses. We expect those segments to fill the profitability gap as we transition to the new console cycle.

The company’s revenues were lower in all of its categories, but profits were higher in two of the four, with new hardware and new software profits falling year-over-year. The company’s “Other” category, which includes digital and mobile businesses, grew 23%. Mobile contributed $12 million in quarterly revenue and GameStop said that amount is on target for the company to reach $150-$200 million in mobile sales for 2012. All the company’s hopes are tied up in a big holiday season.

The company’s forecast will devour the share price today. GameStop forecast second quarter sales down -11% to -5% and EPS of $0.10-$0.18. The consensus EPS estimate had been $0.26, less than half this quarter’s EPS. The company maintained its full-year EPS guidance of $3.10-$3.30, with the consensus analyst estimate of $3.20 right in the middle.

GameStop will need a miracle to reach those numbers. By the company’s own plan it will be less than a third of the way to its EPS target at the end of the first half of the fiscal year. Even if the company equals last year’s EPS for the second half of the year, it will still fall way short of the current guidance.

Shares are down -9.2% at $18.92 in the first twenty minutes of trading this morning. The stock’s 52-week range is $18.34-$28.66.

Paul Ausick

The company is also calling this coming year a year it breaks away from the pack with a very different profile than the traditional game companies and capabilities. It also noted that none of the company’s new digital competitors can match EA. The video game giant further noted 20% non-GAAP EPS growth in fiscal 2012, and it now expects over 30% growth in 2013, based upon the midpoint of own guidance.

In this past quarter, EA generated net revenue of $977 million, and that was slightly ahead of its guidance of $925 to $975 million. Non-GAAP diluted earnings per share of $0.17 was in line with its guidance of $0.10 to $0.20 EPS. Thomson Reuters had estimates of $0.16 EPS and $958.5 million in revenues.

Guidance is being offered for a year out to its February 2013 year-end: $4.3 billion in sales and $1.05 to $1.20 EPS (both non-GAAP of course) against Thomson Reuters estimates of $1.12 EPS and $4.5 billion in sales.

Next quarter guidance is being put at -$0.45 to -$0.40 EPS and $500 million in revenue (both also non-GAAP) against Thomson Reuters estimates of -$0.33 EPS and $577.9 million in sales.

EA shares closed up $0.01 at $15.13 against a 52-week range of $14.48 to $26.13; shares are down about 7.3% at $13.90 in the after-hours session.

JON C. OGG

The guidance for 2012 is as follows: Bookings are projected to be in the range of $1.425 billion to $1.5 billion, with most growth weighted in the second half.  Full year 2012 non-GAAP EPS of $0.23 to $0.29.  Thomson Reuters has revenue projections of $1.42 billion and non-GAAP earnings of $0.27 EPS.

The company talked up its record bookings at $329 million for a 15% gain.  New game development drove down its EBITDA by 23% to $87 million on an adjusted basis. Daily active users have risen from 62 million in the first quarter  of 2011 to 65 million in the first quarter of 2012, for a gain of 6%.  Monthly active users have risen from 236 million in the first quarter of 2011 up to 292 million in the first quarter of 2012, for a gain of 24%.

We were not sure how Zynga would offer up guidance, but here is what the company offered up as additional 2012 outlook figures beyond the above guidance:

• Adjusted EBITDA of $400 million to $450 million.
• Cap-ex of $390 million to $410 million, including its headquarters purchase.
• Effective non-GAAP tax rate of 25% to 30%.
• Non-GAAP weighted-average diluted shares outstanding of about 880 million shares in the fourth quarter of 2012.

Zynga closed up 3.4% at $9.42 and the stock is up 1.6% at $9.57 in the after-hours session reaction.  Zynga is still trading as a busted IPO in the classic sense of the term.  Today’s numbers are not exactly blowout figures and the guidance seems mostly in-line with estimates for the year.  We also have a hard time trusting that the increases will be back-end loaded considering that the company has no history to refer back to as a trust factor.

This may be good enough for some investors but this is not a screaming buy as far as we can see without hearing the conference call as of yet.

JON C. OGG

All of the action is in the May 2012 Calls and Puts with more than 10,000 traded in each series:

• The $9 Calls saw more than 12,000 contracts trade, more than its entire open interest before today.
• The $11 Calls also saw more than 12,000 contracts trade, and that is also more than its entire open interest before today.
• The $8 Puts in May saw more than 11,300 contracts trade today, which is nearing 3-times Zynga’s entire open interest before today.

As a reminder, trading volume of 10,000 options contracts actually translates to 1 million shares of common stock if you take it at face value on a fully leveraged basis of 1 contract per 100 shares of common stock.

Zynga shares are trading up almost 3% at $9.38 ahead of the report and the post-IPO range is $7.97 to $15.91.  Yahoo! Finance lists its market capitalization rate as $6.77 billion for the company’s equity value.

Thomson Reuters has estimates of $0.05 EPS on $317.25 million in revenue.  Next quarter estimates are $0.06 EPS and $339.55 million in revenue.  Keep in mind that Zynga is trading as a busted IPO as of now.

JON C. OGG

The operating loss of 37.3 billion yen in the year that ended March 31 compared with a consensus estimate of a 41.4 billion yen loss, based on forecasts by 20 analysts surveyed by Thomson Reuters I/B/E/S.

The real threat to Nintendo’s ongoing profitability is rivals Sony (NYSE: SNE) and Microsoft (NASDAQ: MSFT) which continue to have sales successes with their respective PS3 and Xbox 360 products. And, all three face competition from the migration of games to smartphones, which is a trend none of the three has been able to combat.

The company is raising guidance and it expects to report net sales of $160 million to $170 million (non-GAAP) and the previous guidance was only a range of $130 million to $150 million.  THQ now expects a fiscal fourth quarter non-GAAP net loss per share in the range of -$0.10 to -$0.20 against a prior loss range of -$0.35 to -$0.50.

Thomson Reuters had a consensus expectation of -$0.41 EPS on $142.3 million in sales.  Unfortunately, this will not make the 2012 year-end in March a profitable one.  Shares closed at $0.45 on Tuesday at a year-low and the 52-week range is $0.45 to $4.67. THQ even raised its year-end cash balance forecast too $76 million as a result of the sales.

Investors should keep in mind that the short interest has been incredibly high here with some 13,785,473 shares listed in the most recent short interest as some believe the company is close to being doomed.  That short interest represents about 11 days to cover.

JON C. OGG

Today’s projection could spell further caution for Activision Blizzard, Inc. (NASDAQ: ATVI), Electronic Arts Inc. (NASDAQ: EA), and Take-Two Interactive Software Inc. (NASDAQ: TTWO).  One issue which could still be a thorn in the side of the video game industry is the freemium games and social games from Zynga, Inc. (NASDAQ: ZNGA) and others.

Stern Agee’s research team for interactive entertainment and internet stocks noted, “U.S. video game software sales in March 2012 were down 25% to 30% year over year, slightly worse than February’s 23% decline. We believe our estimate is slightly below the Street’s.”

The forward data is a bit ominous as well because the April comparable sales were up 16% a year ago and that is likely to translate to another double-digit drop as well.

The firm noted strength may arrive in May and noted, “We expect software sales in the month of May to improve (and potentially be up) driven by the launch of Max Payne 3, Diablo III and Tom Clancy’s Ghost Recon Future Soldier compared to L.A. Noire and a couple of smaller titles.”

If the data is really ugly on Thursday, video game stocks could have a very rough day on Friday just from the headline shocks.

While the broad market is up, video game stocks are lower.  GameStop Corporation (NYSE: GME) is down 0.5% at $21.31, Activision Blizzard, Inc. (NASDAQ: ATVI) is down 0.3% at $12.33, Electronic Arts Inc. (NASDAQ: EA) is up 1.6% at $15.80, and Take-Two Interactive Software Inc. (NASDAQ: TTWO) is up only $0.01 at $14.75.  Zynga, Inc. (NASDAQ: ZNGA) is also lower by 0.9% at $11.41.

JON C. OGG

Rovio is also developing activity parks based on the game. The first of these parks will open in late April in Finland, Rovio’s home. The company hopes to meld the digital and real worlds by offering additional game content, rewards, and special features to park visitors, according to a report in the UK’s The Telegraph newspaper.

The filing was actually for 43 million shares, with 16.5 million shares being from Pincus. Kleiner Perkins Caufield & Byers and Union Square Ventures are both also selling shares in the offering. Pincus will still have almost 36% of the voting interest in the company after this share sale.

This is just very soon for a lock-up to be waived.  While it is not dilutive in definition, it certainly puts much more supply of stock on the street.

Shares are up more than 30% from the 100 million share initial public offering and the pre-market indication is down by 2% to $13.45 in pre-market trading.

JON C. OGG