NEW YORK (TheStreet) -- GameStop (GME) - Get Report stock is retreating by 6.10% to $28.15 in late morning trading on Friday, after the retailer set its fiscal 2016 second quarter earnings guidance below estimates.

After yesterday's closing bell, the Grapevine, TX-based video game and consumer electronics retailer issued earnings guidance of 23 cents to 30 cents per share, while analysts are estimating 33 cents per share in earnings for the next quarter.

"GME is cheap on F2016 estimates and heavily shorted... but the shift to digital is looking even more inevitable, in our view," Pacific Crest analysts said in a note released this morning.

GameStop is expecting comparable store sales to fall by 4% to 7% for the second quarter, which shows how the company's results are likely to stay volatile while the industry transitions to digital games, according to analysts at Sterne Agee.

"While management believes digital downloads will represent 25% to 30% of unit sales in a few years, some of the recent commentary from publishers suggest the industry is already at that level for some key video game titles and this adds to near-term uncertainty," Sterne Agee said in a separate note.

Separately, GameStop has a "hold" rating and a letter grade of C+ at TheStreet Ratings because of the company's growth in earnings per share, revenue growth and attractive valuation levels, which offsets generally stock disappointing performance and poor profit margins.

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

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 article's author.

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