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GameStop Plunges After Q3 Loss, Guidance Cut as Gamers Wait For Next Gen Console Launches

GameStop shares have lost more than half their value this year as video game enthusiasts put off new console and game purchases ahead of next generation console launches expected late next year.

GameStop Corp  (GME) - Get GameStop Corporation Report shares plunged Wednesday after the video game retailer posted a wider-than-expected third quarter loss, and lowered it full-year profit guidance, as gamers continue to put off new purchases in advance of 2020 PS4 and Xbox releases .

GameStop said its adjusted loss for the three months ending on November 2 was pegged at 49 cents per share, much wider than the Street consensus forecast of an 11 cents per share profit. Global sales were also pounded, falling 25.7% to $1.4 billion as the group faced both a delay in new console launches, which aren't expected until late next year, and the rise of streaming video game services from the likes of Apple  (AAPL) - Get Apple Inc. Report and Google  (GOOGL) - Get Alphabet Inc. Report.

GameStop said it expects same-store sales to fall by a "high teens" percentage across the whole of 2019, and sees adjusted earnings in the range of 10 cents to 20 cents per share - down from its September forecast of $1.15 to $1.30 per share. 

"It's important to keep in mind that this is not uniquely a GameStop issue. This is a console issue and consoles are the trigger point for our industry," CEO George Sherman told investors on a conference call late Tuesday. "With Generation nine consoles on the horizon set to bring excitement and significant innovation to the video game space, those anticipated releases in late 2020 are putting pressure on the current generation of consoles and related games, as consumers wait for new technology and publishers address their software delivery plans."

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"Looking ahead, we believe this trend will likely carry through our next several quarters until the launch of the next-generation consoles," Sherman added. "At this stage, we've entered the commoditization phase of the console cycle, where promotional pricing is driving sales. And if you're out shopping or doing store checks over Black Friday or Cyber Monday you likely saw a clear example of that discount stands."

GameStop shares were marked 15.7% lower in early Wednesday trading to change hands at $5.48 each, a move that would extend the stock's year-to-date tumble past 58%.

Looking out, not only is it difficult to see how results will improve in a new cycle (after all, the last cycle didn’t seem to stimulate enough software/pre-owned), but what happens between now and then is more concerning," said Credit Suisse analyst Seth Sigman, who lowered his price target on the stock to $5 a share with an underperform rating.

"Guidance for 2019 was lowered to a shocking level and there seems to be little if any near-term visibility," he added.