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GameStop Stock Has Limited Upside Potential

GameStop stock

GameStop (NYSE: GME) stock price lost more than half of its value in the past twelve months. The share price selloff is supported by a high double digit decline in sales. It has also been losing its profitability due to sales drop. Some analysts are predicting GameStop shares to trade below $5 level in 2020. This is because of the bleak outlook for the final quarter.

GameStop stock price is currently trading slightly above $5, up from a 52-weeks low of $3.15 per share. GME share price is down 65% in the past twelve months. The regulatory restrictions are among the biggest contributor to share price selloff.

GME GameStop Corp. daily Stock Chart

Poor Financial Numbers Are Impacting GameStop Stock    

The company has reported a sale decline across all segments in the latest quarter. Its consolidated global sales plunged 25.7% to $1.4 billion in the latest quarter, driven by new hardware sales decline of 45.8%. In addition, its new software sales fell 32.6% year over year in the latest quarter. Moreover, accessories sales decreased by 13.4% in the latest quarter.

George Sherman, GameStop’s chief executive officer said, “Our third-quarter results continue to reflect the prevailing industry trends, most notably the unprecedented decline in new hardware sales seen across the market as the current generation of gaming consoles reaches the end of their lifecycle.

GME also lost its earnings potential despite a significant decline in outstanding shares. The company generated third-quarter GAAP net loss of $83.4 million. It had repurchased almost one-third of its outstanding shares in the past few years.

Bleak Outlook Limits Upside Potential

GameStop sales for the nine-week holiday period dropped 27.5% Y/Y to $1.83B. Its comparable-store sales also plunged 24.7%. Its comparable-store sales are likely to drop by 19% to 21% for fiscal 2019. GME anticipates full-year earnings of around $0.10 per share, down from the previous estimate of $1.30 per share and down from the consensus estimate for $1.26. Overall, GameStop stock price is likely to remain under pressure.

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Based in Saudi Arabia, Siraj has a strong understanding of and passion for accounting and finance. He has worked for international clients for many years on several projects related to the stock market, equity research and other business, accounting and finance related projects. Siraj is a published financial analyst on the world's leading websites including SeekingAlpha, TheStreet, MSN, and others.