We have maintained our long-term Neutral recommendation on
) with a target price of $42.00.
Why the Reiteration?
GameStop is well positioned to take the advantage of the
growing market for video game products and PC entertainment
software. The company's strategy is to evolve through store
expansions in favorable localities, by providing the largest
title collection of video games and leveraging its
first-to-market distribution network to offer the latest hardware
and software releases.
The company holds a dominant position in the used video game
products market and provides a greater selection of used video
game products for both current and previous generation platforms.
This has largely helped the company to remain afloat amid the
challenging environment as the market for used video game
products has been resilient to the recent economic downturn.
Despite these positives, this Zacks Rank #3 (Hold) company had
earlier cautioned about a tough first half with customers
postponing their purchasing activities due to the launch of a new
console in the fourth quarter.
Management forecasts second-quarter fiscal 2013
comparable-store sales to decrease between 12.5% and 16%.
Earnings are predicted to be in the range of 1 cent to 7 cents a
share. For fiscal 2013, GameStop now expects comparable-stores
sales to be in the range of -5% to +1.5%. Earnings are projected
between $2.90 and $3.15 per share.
Further, the video game industry is highly competitive, and
video game shoppers now have many alternatives to buy software,
hardware, and game accessories for video game systems and
personal computers. Alongside, competition from retail
heavyweights such as
Wal-Mart Stores Inc
Best Buy Co., Inc
) could dent GameStop's sales and margins.
Other Stock to Consider
Until any further upgrade in GameStop's Zacks Rank, the other
company in the retail, wholesale sector worth considering
), which holds a favorable Zacks Rank #1 (Strong Buy).
BEST BUY (BBY): Free Stock Analysis Report
CONNS INC (CONN): Free Stock Analysis Report
GAMESTOP CORP (GME): Free Stock Analysis
WAL-MART STORES (WMT): Free Stock Analysis
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