GameStop Q3 Earnings Preview

GameStop Corp. GME will announce Q3 earnings Thursday.

Consensus estimates were for EPS of $0.61 on revenue of $2.2 billion.

Wedbush analyst Michael Pachter “expected Q3 results at the high-end of guidance. Our estimates are for revenue of $2.28 billion, comps of up 5 percent, and EPS of $0.66, versus consensus of $2.21 billion and $0.61, and guidance for comps of up 1 – 5 percent and EPS of $0.58 –0.64.”

Overall, Pachter continued to believe that GameStop’s core business will have a long tail. As long as physical video game products are produced, we expect GameStop to remain the market leader at retail, and we believe that the company’s large used game business solidifies its relationship with a very large segment of the gaming population that values used games as currency to fund new game purchases.

"Given that next-generation consoles contain disc drives and there are no plans by the manufacturers to block used games, we think that GameStop has at least 10 years of runway left in its core business.”

Sterne Agee analyst Arvind Bhatia thought “GME's F3Q revenue mix is likely to be different than consensus estimates. Based on Factset data, consensus hardware sales estimate is $346.8 or +63 percent y/y.

"We think this is too low given US video game hardware industry sales increase of 102 percent y/y. Our hardware sales estimate is significantly different at $474M (or +122 percent y/y) and assumes market share gains. On the other hand, we think consensus software estimate of $979.5M (-11 percent y/y) is too high given US video game software industry sales decline of 31 percent y/y. Our software sales estimate for GME’s F3Q is $853M (-23 percent y/y).”

GameStop Corp. shares were under pressure Wednesday, trading at $43.61, down 0.93 precent