NEW YORK (TheStreet) -- Shares of video game retailer GameStop Corp. (GME) - Get GameStop Corp. Class A Report are falling, down 4.83% to $39.79, in midday trading Tuesday after Wal-Mart Stores Inc. (WMT) - Get Walmart Inc. Reportannounced the launch of a certified preowned program to sell used video games in 1,700 of its 4,800 of its U.S. stores, putting it in direct competition with GameStop.
The retail giant first disclosed in March that it will sell used games in the summer at a few select stores, as it launched a trade-in program offering store credit. Now, the company will sell the games it has collected over the past seven months.
However, Wedbush analyst Michael Pachter doesn't think Walmart will be a fundamental threat to the video game company, Bloomberg reports.
Separately, Walmart announced that it will offer 'Call of Duty: Advanced Warfare' this morning. The Day Zero Edition of Activision Blizzard's (ATVI) - Get Activision Blizzard, Inc. Report flagship franchise game will be available to customers on Nov. 3.
Shares of Walmart are lower by 0.68% to $76.07 today.
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 few notable 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, impressive record of earnings per share growth, compelling growth in net income, reasonable valuation levels and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows low profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 1.0%. Since the same quarter one year prior, revenues rose by 25.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- GAMESTOP CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. 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 ($3.68 versus $3.02).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Specialty Retail industry. The net income increased by 134.3% when compared to the same quarter one year prior, rising from $10.50 million to $24.60 million.
- GME's debt-to-equity ratio is very low at 0.10 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.20 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