2 Concerns With GameStop’s Q1 Report: Software, Mobile

2 Concerns With GameStop’s Q1 Report: Software, Mobile


2 Concerns With GameStop's Q1 Report: Software, Mobile

Despite a solid first-quarter earnings and sales beat, GameStop Corp. (NYSE: GME) shares fell rapidly Friday due to weak projected comps and segment weakness.

Positives in the quarter included upside to hardware, a lower tax rate and strong collectibles growth. Negatives included weaker software and mobile trends, and continued declines in pre-owned games.

Nintendo Co., Ltd (ADR) (OTC: NTDOY) Switch console was a bright spot for the company, leading hardware to a 24.6-percent increase and driving accessories to a 8.2-percent gain. Software was particularly weak, down 8.2 percent due to difficult compares.

Analyst Commentary

Analysts at Credit Suisse expect software to continue to be difficult, as the industry laps several key games released last May. The delay of “Red Dead 2” into 2018 could also cost GameStop 1.5 percent in total sales.

“Guidance implies an improvement in 2H including increased sales proficiency in entertainment products, and improvements from the expected iPhone 8 launch,” said Credit Suisse analyst Seth Sigman.

Credit Suisse maintains a Neutral rating on GameStop, with a $20 price target.

Related Links:

GameStop Q1 Sales Strength Mixed With Segment Weakness

Nintendo Switch Gives GameStop An Extra Life In Q1