Is GameStop worth playing?

Is GameStop worth playing?

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Short sellers may not like what GameStop is selling, but the video game retailer's revenue keeps on climbing. 

Remember when people said the market for new and pre-owned video games is dying? Despite massive bearishness at 42.95 percent of stock float, GameStop (GME) is still defying naysayers. Is its demise greatly exaggerated?

GameStop reported higher revenue in its second-quarter earnings at the end of August. Total revenue rose 1.8 percent to $1.76 billion from a year earlier, same-store sales increased 10.8 percent year over year and gross profit improved by 1.1 percent to 32.9 percent. Even though new hardware and software sales contributed less to revenue, declining 2.2 percent and 6 percent, respectively, GameStop issued a solid outlook.

For the third quarter, GameStop expects to earn between $0.53 and $0.60 per share. It launched an aggressive strategy—GameStop 3.0—in April 2014, closing stores and focusing on mobile. The company’s shift towards mobile and digital downloads is working: the Mobile and Consumer Electronics segment’s revenue grew 26.9 percent to $142.2 million.

GameStop’s stock is down 1.74 percent over the last year. It is underperforming game maker Activision (ATVI), but it is outperforming mobile game maker Glu Mobile (GLUU):

Traditional game developers are doing well because their customer base, with an average age of 35, is loyal. These users will buy the latest games, upgrade computer hardware and buy consoles. On the other hand, interest in mobile games is hit and miss, and mobile game makers must develop new titles to offset older game releases. 

Yet, for the current quarter, only one of the three aforementioned firms is expected to see an increase in revenue, and that's GameStop. The average analyst estimate for Activision is that its third-quarter revenue will fall 18.50 percent to $953.87 million. Glu Mobile's third-quarter revenue is projected to plunge 29 percent to $59.33 million while hte consensus estimate for GameStop's third-quarter revenue is a 2.8 percent increase to $2.15 billion.

Written by Chris Lau



Click on the interactive chart to view data over time. 

1. Activision Blizzard Inc. (ATVI, Earnings, Analysts, Financials): Publishes online, personal computer (PC), console, handheld, and mobile games of interactive entertainment worldwide. Market cap at $21.19B, most recent closing price at $29.15.



2. Glu Mobile Inc. (GLUU, Earnings, Analysts, Financials): Engages in the design, marketing, and sale of casual and traditional mobile games worldwide. Market cap at $590.22M, most recent closing price at $4.60.



3. GameStop Corp. (GME, Earnings, Analysts, Financials): Operates as a retailer of video game products and personal computer (PC) entertainment software. Market cap at $4.50B, most recent closing price at $42.78.



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13 responses to “Is GameStop worth playing?”

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