Pacific Crest Says 'Difficult To Recommend' GameStop Following Q1 Earnings; Stock Slumps 6%
GameStop Corp. (NYSE: GME) reported marginally better-than-anticipated F1Q results, although its F2Q guidance was disappointing.
Pacific Crest’s Evan Wilson maintains a Sector Weight rating on the company.
“For the year, we still think GameStop is overly optimistic as our analysis of the 2016 slate, combined with the shift to digital, shows another difficult year,” Wilson mentioned.
The company reported sales of $1.97 billion for the quarter, in line with the estimate, while the same store sales decline was not as bad as estimated.
The EPS for F1Q came in at $0.66, ahead of the estimate of $0.63, driven by a product mix shift to software, which entails higher margins than hardware.
Wilson mentioned that the 2016 slate was not “looking strong enough at this point to offset the digital headwinds and the comparisons of 'Star Wars Battlefront' and 'Fallout 4' and no 'Assassin's Creed' for the first time in years.”
The analyst expects a decline in physical software growth once again in 2016, continuing from the consecutive declines seen since 2009.
“The lack of a great slate in 2016 makes it very difficult to recommend the name,” Wilson added.
Latest Ratings for GME
|Dec 2016||Standpoint Research||Upgrades||Hold||Buy|
|Dec 2016||Mizuho||Initiates Coverage On||Buy|
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