GameStop Stuck in 'Value Trap': Analyst - TheStreet

GameStop Stuck in 'Value Trap': Analyst

GameStop is downgraded by Credit Suisse to neutral.
Author:
Publish date:

NEW YORK (

TheStreet

) --

GameStop

(GME) - Get Report

is sinking Tuesday morning after being downgraded by Credit Suisse.

The firm cut the video-game retailer to neutral from outperform and lowered its target price on the stock to $25 from $28.

Analyst Gary Balter wrote in a research note that he fears the company is in a "value trap" and does not expect much multiple expansion.

Deep discounts from retailers like

Wal-Mart

(WMT) - Get Report

and

Amazon

(AMZN) - Get Report

could stifle multiple expansion, as well as increasing use of digital downloads, aggressive expansion plans, and weakness in the catalog business as casual gamers find entertainment alternatives, Balter wrote.

"Signs of stabilizing margins and how the company can grow margins again are key, as well as signs of improving secular trends particularly outside just the core gamer and handful of AAA titles each year," he wrote.

The downgrade follows the release of

Electronic Arts'

(ERTS)

dour fourth-quarter outlook.

After reporting a narrow loss in third-quarter, the video game maker said it expects fourth-quarter earnings between 2 cents and 6 cents a share, less than half of what analysts forecast.

Shares of GameStop are falling 3.6% to $18.99, while Electronic Arts is plunging 8.7% to $15.98.

-- Reported by Jeanine Poggi in New York.

Follow TheStreet.com on

Twitter

and become a fan on

Facebook.

Copyright 2009 TheStreet.com Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.