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TheStreet Open House

Will This Upgrade Effect GameStop (GME) Stock Today?

NEW YORK (TheStreet) -- GameStop (GME) is up 2.39% to $45.45 in premarket trading on Friday. GameStop has been upgraded to "buy" from "neutral" at Bank of America (BAC), raising its price objective to $56 from $43. Earlier in the week, Bank of America downgraded the electronics and gaming company to "neutral" due to their "worse than expected holiday results."

Now, Bank of America believes GameStop sales will soon rise and that the company will benefit from the new gaming consoles hitting the market.

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TheStreet Ratings team rates GAMESTOP CORP as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate GAMESTOP CORP (GME) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, attractive valuation levels, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 6.6%. Since the same quarter one year prior, revenues slightly increased by 3.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to its closing price of one year ago, GME's share price has jumped by 41.13%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, GME should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • GAMESTOP CORP's earnings per share declined by 12.1% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, GAMESTOP CORP turned its bottom line around by earning $3.02 versus -$2.23 in the prior year. This year, the market expects an improvement in earnings ($3.71 versus $3.02).
  • GME has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.36 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • You can view the full analysis from the report here: GME Ratings Report

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