Reading earnings news on Gamestop Inc. (GME), I am, for the
first time, questioning if we are right with GME. I know digital is
increasing, but they are getting some of that pie. The customers
are extremely loyal and buy DLC (cards) through them. Their Apple
product sales are increasing as Apple is increasing their product
offerings. Combined with this being one of the most heavily shorted
stocks and relatively cheap on a P/E and P/S basis, I wonder if we
shouldn’t be more bullish on GME. Maybe it is because I
thought of buying at 39 as an earnings play but did not and now I
Estimates for FY (Jan) 16 – 3.83 (same as guidance) and
FY17 – 4.38. This puts P/E at 11.5 and 10, respectively
(based on share price of 44). I think this year's EPS guidance may
be a bit low.
Comparisons to Radio Shack – one major difference, GME has
customers in their stores. Same store sales (stores open >1
year) were up over 8% YoY. Digital sales were up over 20% and
expected to hit 1 billion this year (~10-11% of rev’s). Not
smart enough to understand the effects of AT&T and Cricket, but
it doesn’t hurt, right?
Last quarter new generation console sales surpassed old
generation (360, PS3), but software resales were down 3.4%. To me
this means there is a lot of growth potential in this cycle in
reselling XBOX One and PS4 games.
Simply Mac – It amazes me, but I can never talk sense to
the Applephiles. They will spend double on a phone or triple on a
laptop because it has a partially eaten apple logo. I think the
potential of being an official Apple reseller is huge and with only
71 stores currently, this will provide growth.
Earnings – the Q1 beat of 9 cents was due to Mortal Kombat
X, Electronic Arts (ERTS)' Battlefield
Hardline, Take-Two (TTWO)'s Evolve