GameStop (GME) Stock Soars on Second Quarter Results

Shares of GameStop Corporation (GME) were up +2.76 or +6.82 percent to $43.25 per share in Friday's premarket, after the company released second quarter earnings which beat analyst expectations after the close on Thursday. GameStop stock closed at $40.49, down -0.84 or -2.03 percent in Thursday's regular trading session.

Grapevine, Texas based GameStop Corporation is a large U.S. based multinational entertainment software and videogame retailer.
The company operates more than 6,700 stores in the United States, Canada, the European Union, Scandinavia, the UK and Switzerland. GameStop Corp. is the result of the merger of several companies, starting in 2005 with EB Games. GameStop continued growing by acquiring Rhino Video Games from Blockbuster in 2007, and finally, the company acquired Spawn Labs and the Impulse and Stardock game distribution platform in 2011.

GameStop Corp. reported earnings of +0.22 per diluted share in the quarter ended on August 2nd, 2014. Global sales in the second quarter came to $1.73 billion versus $1.38 billion in the same period one year ago, an increase of +25.1 percent. GameStop consolidated comparable store sales increased +21.9 percent. The analyst consensus was for GameStop to earn $0.18 per share in the second quarter.

The global demand for new gaming consoles such as Sony's (SNE) PlayStation 4 and Microsoft's (MSFT) Xbox One pushed new hardware sales up +124.8 percent. New software sales grew +15.6 percent in the quarter, due in large part to the success of titles like Nintendo's Mario Kart 8 and Ubisoft's Watch Dogs, while pre-owned title sales increased +5.5 percent in the quarter.

The company's Technology Brands segment was responsible for +19 percent of the company's second quarter operating profit, with a +85.1 percent increase in the mobile and consumer electronics category. Due to the company's ongoing expansion, GameStop reported strong results from subsidiaries Spring Mobile and Simply Mac.

Tony Bartel, GameStop President, addressed a post-earnings conference with analysts yesterday afternoon. Chief Executive Paul Raines was unable to attend the conference, being in recovery after undergoing brain surgery last week. The procedure removed a cancerous tumor and Raines is expected to have a full recovery.

Bartel told the conference that, "The second quarter exceeded our expectations, with earnings per share beating the high end of our guidance by $0.02. The new console cycle is gaining momentum, driving positive 21.9% comp sales and total sales growth of 25%, driven by 125% growth in new hardware and 16% growth in new software. We have now had four consecutive quarters of positive comps, and we expect that trend to continue for the foreseeable future.

GameStop now expects fiscal third quarter earnings per share of $0.58 to $0.64 versus an analyst consensus of $0.57, with comparable store sales growth of 1 to 5 percent. Full year guidance was maintained at $3.40 to $3.70 per share - analysts have increased their estimate to $3.67 - with full year comparable sales growth of 6 to 12 percent.

GameStop stock is in the middle of its yearly range, having traded as high as $57.74 per share last November. The stock's dividend of $1.32 has a yield of +3.3 percent and trades at 13 times earnings. With the company profiting from the success of new gaming consoles and new games, the stock could test its previous highs.

Other News About GameStop
GameStop CEO treated for cancerous brain tumor
CEO Paul Raines is expected to stay on the job after making a full recovery.
GameStop Announces New Simplified Trade-In Pricing
New trade-in pricing began August 18th.

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H-P is between a rock and its hardware
With HP stock up +40 percent this year, analyst are wondering if the company can sustain revenue growth.

Published on Aug 22, 2014
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2016. Content published with author's permission.

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