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GameStop Hits 52 Week High: Will it Sustain the Momentum? - Analyst Blog

GameStop Corp.GME reached a new 52-week high of $47.34 on Jul 10 and eventually closed trade a notch lower at $46.96, surging roughly 41.4% year to date. The upside mainly came on the back of certain notable developments which will likely help it to sustain the momentum going forward.

These include collaboration with AT&T, Inc. T and Apple Inc. AAPL , increasing sale of downloadable content as well as venturing into fast growing entertainment collectable and licensed merchandising category.

GameStop has been constantly bringing innovations in the digital category to enhance sales. Recently, the company acquired Geeknet, the parent company of ThinkGeek and ThinkGeek Solutions to boost its digital sales.Moreover, adding GameStop Impulse to its website, in a time when a sharp rise in consumer spending on digital download, mobile gaming apps, social network games, and used games has been observed, will help GameStop to strengthen its foothold.

The company reported a 17.2% rise in adjusted digital receipts to $222.2 million in first-quarter fiscal 2015. Moreover, sales in Kongregate Mobile increased 37% year over year. With 12 games scheduled to release this year, the momentum seen in Kongregate Mobile is likely to sustain.

Additionally, GameStop considers the entertainment collectable and licensed merchandising category to be a lucrative one. The company successfully piloted the project in Australia. The company expects this fast growing consumer segment to generate business of $500 million over a three-year time frame.

Also, collaboration with AT&T and Apple has proven beneficial for GameStop as the Technology Brands segment's revenues increased 70% year over year to $102.2 million. The company ended the first quarter of fiscal 2015 with 549 stores.

Further, the segment is expected to sustain its growth momentum as the company is keen on rapidly expanding its footprint by opening 450 to 550 stores in fiscal 2015, nearly 200 over the summer, and increasing the segment's annual profits by 30% to 40%.

Apart from these developments, GameStop's extensive shareholder friendly initiatives will help it to retain investor interest. In March, the company raised its dividend by 9% while it bought back shares worth $333 million in fiscal 2014 and another $46 million in the first quarter of fiscal 2015.

At present, GameStop carries a Zacks Rank #3 (Hold). A better-ranked stock in same sector is Aaron's, Inc. AAN , carrying a Zacks Rank #1 (Strong Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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