As I write this, shares of GameStop Corp. (GME) are plummetting after hours following the video game retailer’s Q4 report. Let’s run down the details and see whether this sell-off is an overreaction (and thus, a buying opportunity) or if it’s game over for GameStop.
By The Numbers
GameStop earned $56.4 million for the fourth quarter, nearly 18% less than this time last year. Adjusted earnings per share were $0.57, which missed the $0.61 consensus estimate by 6.6%. The video game retailer posted $2.09 billion in revenue, also missing the $2.2 billion consensus estimate by 5%.
In explaining the lackluster results, GameStop pointed to video game developer Ubisoft SA’s decision to delay the launch of Assassin’s Creed Unity. According to management, GameStop’s fourth-quarter revenues took a 1% hit because the blockbuster game was released two weeks later than originally intended.
And it looks like GameStop is going to be playing catch-up for the current quarter. The company now expects same-store sales to be anywhere from 5% below to 2% higher than the year ago quarter. GameStop also expects earnings in a range of $2.08 to $2.24 per share, below the Street view of $2.28 EPS.
The Bottom Line
Unfortunately, there really were no redeeming qualities to this earnings report, so the sell-off isn’t an overreaction. GME earns a D-rating in Portfolio Grader, making it a sell.