So… Does Wall Street Like GameStop Now?
Here are what three of Wall Street's top analysts have to say.
Wedbush: There Is Little Critical That Can Be Said
Michael Pachter commented in a note that "there is little critical that can be said" about GameStop's results and guidance. The company "solidly" exceeded its earnings per share guidance while revenue came in at the high-end of its guidance range.
Pachter noted that the upside stemmed mostly from a better-than-expected gross margin, especially for used video game products and mobile and "solid" cost controls. He added that "most surprising" was the company's second quarter guidance that is calling for roughly flat revenues and EPS growth year-over-year when faced with a difficult comparison.
Bottom line, GameStop's customers will remain loyal to its buy-sell-trade value proposition and will resist digital downloads for years to come. As such, the company's core business will continue operating so long as physical video game products are produced and GameStop will remain the market leader at retail.
Shares remain Outperform rated with a price target increased to $52 from a previous $50.
Pacific Crest: Bullish Thesis Intact
Evan Wilson commented in a note that GameStop's upside and better-than-expected second quarter guidance improves its changes to deliver full year guidance at a time when digital downloads are growing.
Wilson continued that digital console downloads continue to rise as a percentage of total game sales. However, physical sales continues to growth as well because of the strong console cyclical trend. The analyst pointed out that new software sales grew 9.6 percent year-over-year for GameStop, a statistic that reinforces his view that software sales will continue growing moving forward.
Nevertheless, Wilson did note that digital downloads of games will prove to be a long-term "challenge" for GameStop, but a better slate in calendar 2015 and next-gen driving the majority of sales puts the challenges in perspective and suggests physical can grow as well.
Looking forward to the rest of the year, Wilson stated that "there is still a lot left to see" but the risk/reward is "favorable" at least in the near-term.
Shares remain Overweight rated with an unchanged $48 price target.
Bank Of America: 2015 An Inflection Year
Curtis Nagle commented in a note that GameStop's first quarter results reinforce his prior arguments that 2015 is an inflection year in terms of increasing leverage of the next-gen cycle and improving sentiment.
Looking forward, the analyst sees key drivers being a "very strong" software lineup (including "Halo," "Star Wars," "Call of Duty" from "Treyarch" and others); growing importance of the high-growth Tech Brands as well as the introduction of collectibles ($500 million in sales over the past three years); reacceleration of the used business as next-gen inventory builds; solid digital growth and performance; and operating in a sector leading free cash flow yield of over 10 percent.
Shares remain Buy rated with a price target raised to $52 from a previous $48.
Latest Ratings for GME
|Dec 2016||Standpoint Research||Upgrades||Hold||Buy|
|Dec 2016||Mizuho||Initiates Coverage On||Buy|
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