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NEW YORK (TheStreet) --  Shares of GameStop (GME) are down by 7.43% to $29.77 in mid-morning trading on Friday, after the company posted disappointing second quarter results after the market close on Thursday.

The company reported non-GAAP diluted earnings per share of 27 cents, down 12.9% relative to the second quarter of 2015. Net sales were roughly $1.63 billion, down 7.4% relative to the second quarter of 2015. EPS was in line with analysts' expectations, analysts forecast for sales of $1.72 billion.

GameStop announced that video game sales were negatively affected by a lack of new titles to offset successful launches from the second quarter of 2015. Hardware sales declined as new information was released about upcoming consoles.

"That's going to be the whole play, whether they can shift to digital and get more revenues out of that," CNBC's Sara Eisen said during a panel discussion about the stock on "Squawk on the Street" on Friday. "I will say this whole demise of physical gaming and video games has been called for for a long time, has been a heavily shorted position and yet it doesn't go away."

The company reported strong results in its e-commerce business as it contends with the challenges that seemingly all physical retailers face today, including a 54.6% growth in technology brand revenues relative to the second quarter of 2015.

"This is a cheap stock, structurally challenged, that is backing off," CNBC's Michael Santoli added. "People are just not sure how long they have to make it work."

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TheStreet Recommends

Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:

We rate GAMESTOP CORP as a Buy with a ratings score of B-. This is driven by multiple 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 attractive valuation levels and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

You can view the full analysis from the report here: GME

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