Stifel Cuts GameStop Estimates After New NPD Data Release, PacCrest Calls It 'Shockingly Bad'

• The share price of GameStop Corp. GME has declined 30.71 percent over the last month, dipping almost to its 52-week low.
• Stifel’s David A. Schick has maintained a Hold rating, while Evan Wilson of Pacific Crest has maintained a Sector Weight rating on the company.
• The NPD data for November was “shockingly bad,” especially given that November is usually the strongest month and contributes 40 percent of the Q4 sales.

November NPD

Analyst David Schick explained the cut in the 4Q15 EPS estimate, saying, “We typically hesitate to lower numbers this early in the quarter, but upside is more limited with November representing about 40 percent of 4Q sales and console software running down -1 percent y/y.”

NPD headline sales for November increased 2 percent year-on-year, following a 2 percent rise in October and a 9 percent decline in September.

Although Schick expects headwinds from Tech Brand to moderate during the quarter, GameStop intends to ramp it significantly to about 10 percent of total earnings in FY16.

However, there could be upside in December due to the release of the Star Wars movie and accelerating sales of "Star Wars: Battlefront" sales.

Related Link: Barclays' Gamers Guide For The Holiday Season

"Video game brand tailwinds may moderate over FY16 – FY17, but tech brands should contribute meaningfully to the bottom-line driving low-double digit EPS growth y/y," Schick added.

The EPS estimates for 4Q15, FY16 and FY17 have been lowered from $2.33 to $2.30, from $4.34 to $4.27 and from $4.88 to $4.81, respectively.

Shockingly Bad

Analyst Evan Wilson, on the other hand, commented, “In the best month of the best year of this videogame cycle, physical software sales were down 7 percent compared to 2014. November was widely expected to show strong growth with a slate full of AAA games, but this data shows industry trends are taking effect.”

Wilson also noted that the positive year-on-year incremental data points for "Call of Duty" was a “huge negative” for the company.

According to the Pacific Crest report, the extremely disappointing physical NPD sales was likely to have largely been driven by the shift to digital downloads, which the NPD data did not account for.

"We think there is some chance that December and January could be better than the disappointments October and November have been, but growth will remain a challenge," Wilson added.