
GameStop (GME) Stock Tanking Following Analyst Downgrade
NEW YORK (TheStreet) -- Shares of GameStop (GME) - Get Report are down 6.74% to $41.53 in pre-market trading on Friday, after the company's rating was downgraded to "sector weight" from "overweight" by analysts at Pacific Crest.
Analyst Evan Wilson noted that the company's physical software sales have not grown as he had previously expected, as new software sales grew only 2.3% through the first and second quarters.
Wilson believes that the lack of stronger growth is attributable to increasing digital downloads.
GameStop has a 12-month trading range between $31.69 and $43.59, and the stock is currently 5% off of its high during that period.
TheStreet has coverage of GameStop's long-term outlook here.
Separately, 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 solid stock price performance, growth in earnings per share, increase in net income, revenue growth and reasonable valuation levels. We feel its strengths outweigh the fact that the company shows low profit margins.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- GAMESTOP CORP has improved earnings per share by 9.1% 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 increased its bottom line by earning $3.54 versus $3.02 in the prior year. This year, the market expects an improvement in earnings ($3.91 versus $3.54).
- The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Specialty Retail industry average. The net income increased by 2.8% when compared to the same quarter one year prior, going from $24.60 million to $25.30 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 9.1%. Since the same quarter one year prior, revenues slightly increased by 1.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- You can view the full analysis from the report here: GME
Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.








