Time To Buy Gamestop Ahead Of Earnings?
Estimize | Aug 25, 2016 12:37AM ET
GameStop Corp (NYSE:GME) Consumer Discretionary - Specialty Retail | Reports August 25, After Market Closes
Key Takeaways
- The Estimize consensus is looking for earnings per share of 29 cents on $1.74 billion in revenue, 2 cents higher than Wall Street on the bottom line and $15 million on the top.
- Video games sales have slowed down in recent quarters due to a shift towards digital downloads and online retailers
- Collectibles, technology branded business and digital offerings are expected to carry earnings in future quarters
- What are you expecting for
Video games are the fastest growing sector in the whole entertainment industry. This trend hasn’t helped GameStop though. GameStop’s woes stem from its backwards business model. Consumers, now more than ever, prefer to download games directly from the publisher or purchase them online.
GameStop, on the other hand, generates a majority of its revenue from its stand alone and mall based stores. This ongoing transition will be mentioned if GameStop misses its second quarter target Thursday afternoon.
Analysts at Estimize are calling for earnings per share of 29 cents, 5% lower than a year earlier. That estimate has been cut by 11% since GameStop’s most recent report in May.
Revenue for the period is anticipated down 1% to $1.74 billion, marking a second consecutive quarter of negative growth. Shares of Gamestop are down 28.5% in the past 12 months and historically have declined 1% following an earnings report.
The recent rise in digital downloads have put GameStop’s business model under fire. Publishers that once heavily relied on stores like Gamestop and BestBuy to push out new games are now going straight to the customer.
Electronic Arts (NASDAQ:EA) and Activision Blizzard (NASDAQ:ATVI) continue to point to digital downloads as one of their fastest growing markets. This clearly doesn’t bode well for GameStop which saw a 28.8% decline in its video game segment during the first quarter.
Gamestop is pursuing new business initiatives in its effort to diversify and grow beyond just a video game company. The foray into entertainment collectibles and licensed merchandise has been profitable.
Sales from this segment grew 260% in the first quarter with expectation to reach $1 billion by 2019. Partnerships with AT&T (NYSE:T) and Apple (NASDAQ:AAPL) have also helped offset some of its recent losses.
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This falls under its technology brand segment which surged 62% last quarter. Between these two initiatives as well as expanding its digital offerings, GameStop is positioning itself for the future.
Do you think GME can beat estimates?
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