What to Expect From GameStop Earnings

March 24, 2016 by Chris Lange

GameStop Corp. (NYSE: GME) is scheduled to report its fiscal fourth-quarter financial results after the markets close on Thursday. The consensus estimates from Thomson Reuters call for $2.25 in earnings per share (EPS) on $3.57 billion in revenue. In the same period of the previous year, the specialty retailer posted EPS of $2.15 and $3.48 billion in revenue.

Trading at below eight times next year’s earnings, this video game retailer might be a steal at this price level, if we’re looking at the short term, but over a longer term it could be a value trap. These earnings should bring some insight into where this stock is really headed.

So far in 2016, GameStop has outperformed the broad markets, with the stock up nearly 10%. However, in the past year the stock is actually down 23%.

Back in January, traders were dumping the stock following the announcement of its holiday sales. Overall most of the results were all right, but a 9.7% decline in software sales dragged the stock down. However, there were other solid numbers, such as total sales up 1.9% and nearly 6% in constant currency. Comparable store sales increased 4.4%, and new hardware was up 4.5%, and over 9% in constant currency, driven by successful promotions for Sony and Microsoft.

A few analysts weighed in on the company ahead of its earnings report:

  • Credit Suisse reiterated a Neutral rating with a $38 price target.
  • Baird reiterated an Outperform rating with a $46 price target.
  • Webush reiterated an Outperform rating with a $38 price target.

GameStop operates as a multichannel video game retailer. It sells new and pre-owned video game hardware; physical and digital video game software; pre-owned and value video game products; and video game accessories, such as controllers, gaming headsets, memory cards and other add-ons, for use with video game hardware and software.

Shares of GameStop were trading down 1% at $30.06 on Thursday, with a consensus analyst price target of $37.04 and a 52-week trading range of $24.33 to $47.83.

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