GameStop Falls As Credit Suisse Lowers Earnings Estimates, Price Target

Changing consumer preferences continue to be a challenge for GameStop Corp. GME, which saw its shares fall Monday as Credit Suisse lowered its price target and earnings estimates for the video game store chain.

The Analyst

Credit Suisse analyst Seth Sigman lowered his price target on GameStop from $10 to $7, while lowering his 2019 EPS estimate from $1.70 to $1.50. Sigman has an Underperform rating on the stock.

The Thesis

GameStop is deeply discounted, Sigman noted, but its key loyalty drivers are under pressure and Sigman said cost initiatives alone won’t offset those pressures.

Part of the problem for GameStop is the increasing consumer preference for digital games, at the expense of buying new ones in-store, Sigman said, citing a Credit Suisse survey.

The survey also shows less interest in trading in games than when Credit Suisse last did the survey in 2015. That’s consistent with a decline in trade-ins and resales over the past few years, and, Sigman wrote, has implications for sales in the entire physical store.

“We envision (and are open to) bigger changes to its stores and product assortment, but that may take time and require more spending, still leaving forecasts at risk,” Sigman wrote in a note.

The company has already acknowledged some difficulties, and issued pessimistic sales guidance for the fiscal year.

Price Action

GameStop's stock was down 5.6 percent to $8.12 per share.

Editor's note: A previous version of this article attributed the survey to Morgan Stanley. This was incorrect.

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