GameStop Jumps After Beating Estimates on Console Demand
GameStop Corp. (GME), the video-game chain that said this week its chief executive had surgery for brain cancer, surged the most in a year after reporting profit that beat estimates as consumers bought new players and software.
Net income more than doubled to $24.6 million, or 22 cents a share, from a year earlier, GameStop said in a statement yesterday. Analysts on average predicted 18 cents, according to data compiled by Bloomberg.
Consumers are upgrading to the new generation of game players, Sony Corp. (6758)’s PlayStation 4 and Microsoft Corp. (MSFT)’s Xbox One, and buying new titles with snappier graphics. Sony said last week that worldwide sales of the PS4 have exceeded 10 million units, a record for its PlayStation devices.
“The faster-than-anticipated uptake of new consoles, as well as the remaining software lineup, bode well for the company,” Michael Olson, a Piper Jaffray & Co. analyst, said in a note before the results. He recommends buying the stock.
GameStop’s sales climbed 25 percent to $1.73 billion in the period ended Aug. 2, beating estimates of $1.64 billion.
The company, based in Grapevine, Texas, said on Aug. 19 that CEO Paul Raines underwent surgery to identify and remove a small cancerous tumor from his brain.
The tumor, located in “an easily accessible” part of the brain, was found early and doctors said his prospects for a full recovery are good, the company said in a filing. Raines, 50, will undergo preventative chemotherapy. His rehabilitation is expected to last about six weeks, a period that will limit his ability to travel without interfering with his duties, GameStop said.
For the current quarter, the company forecasts profit of 58 cents to 64 cents a share, compared with analysts’ projections of 58 cents. GameStop predicts comparable store sales will grow 1 percent to 5 percent from a year earlier. For the fiscal full-year, it reaffirmed forecasts for earnings of $3.40 to $3.70 a share and store sales to rise 6 percent to 12 percent.
Olson expects software sales for the rest of the year to improve with the release of new titles such as Destiny and Call of Duty from Activision Blizzard Inc. (ATVI), a remastered Grand Theft Auto V from Take-Two Interactive Software Inc. (TTWO), and FIFA 15 and Madden NFL by Electronic Arts Inc. (EA)
GameStop’s shares had declined 18 percent this year through yesterday.
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