GameStop Stock Price Is Set To Extend Bearish Trend Amid Bleak Outlook

GameStop (NYSE: GME) stock price has been under pressure over the past five years. Its stock price had lost 60% of value in the last twelve months alone, extending five years selloff to 88%. The shares plummeted from $45 level in 2015 to $5 at present. The bearish trend is likely to extend the momentum amid a bleak financial outlook.

GME GameStop Corp. weekly Stock Chart

The company has recently reported lower than expected results for the second quarter. In addition, it has highlighted a bleak outlook for the rest of the year.

GameStop missed Q2 revenue estimate by $40 million. Its second-quarter revenue of $1.29B declined 14% year over year.

Its new hardware sales plunged 41.1% while new software sales dropped 5.3% year over year. Accessories sales decreased by 9.5% Y/Y. Moreover, pre-owned sales declined 17.5% and digital receipts plummeted 11.2% year over year in the second quarter.

Jim Bell, GameStop’s chief financial officer said, “While we experienced sales declines across a number of our categories during the quarter, these trends are consistent with what we have historically observed towards the end of a hardware cycle.”

The company has recently announced a new business strategy to handle the headwinds. It is now working on a new strategic plan that is anchored on four tenets:

  1. Optimizing the core business by driving efficiency and effectiveness
  2. Creating the social and cultural hub of gaming within each GameStop
  3. Building compelling digital capabilities
  4. Transforming vendor and partner relationships

Although its new business plan looks attractive, the company needs a longer time for complete stabilization.

It expects to generate a low teen digit decline in revenues in 2019 compared to the previous year. Previously the company had predicted a single-digit decline in revenues.

The company now expects earnings per share in the range of $1.15 to $1.30 compared to the analysts’ consensus estimate for $1.61. Overall, GameStop stock price is likely to extend the bearish trend. Declining financial numbers and restructuring actions could keep the stock price 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.

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