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Despite Solid Earnings, GameStop Tumbles on Guidance and Downgrades

GameStop Corp. (NYSE: GME) reported its fiscal second-quarter financial results after the markets closed on Thursday, but despite solid results this game retailer suffered in Friday’s session. The company posted diluted earnings per share (EPS) of $0.31 on $1.76 billion in revenues. In the same period a year ago, the company reported EPS of $0.22 on revenue of $1.73 billion. Second-quarter results also compare to the Thomson Reuters consensus estimates for EPS of $0.25 and $1.74 billion in revenue.

In terms of the guidance for the third quarter of its fiscal year, GameStop forecast a same-store sales increase in the range of 1% to 4% and diluted EPS of $0.53 to $0.60. Last year, the company posted EPS of $0.57 in the third quarter. Consensus estimates for the fiscal third quarter are EPS of $0.59 and $2.16 billion in revenue.

In the earnings report, GameStop’s CEO said:

During the second half of the year, we anticipate momentum in our core gaming business with the launch of several AAA titles, complementing growth in our pre-owned segment being fueled by a continuing shift to next-gen products. We also expect Technology Brands and collectibles products to contribute meaningful profits for the balance of the year.

A few analysts weighed in on GameStop after it reported earnings:

  • Wedbush had an Outperform rating and raised its price target to $55 from $52.
  • Benchmark downgraded the company to a Sell rating from Hold.
  • Robert Baird has a Buy rating with a $54 price target.
  • Telsey Advisory Group has a Market Perform rating and raised its price target to $47 from $42.

Shares of GameStop were down 6.6% at $43.16 Friday morning. The stock has a consensus analyst price target of $48.34 and a 52-week trading range of $31.69 to $47.83.

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By Chris Lange