One possible factor pushing the video game store's stock down is the recent partnership between Microsoft (MSFT) - Get Microsoft Corporation Report and Electronic Arts (EA) - Get Electronic Arts Inc. Report regarding the Xbox One.
Video game developer EA announced a subscription service that will run exclusively on Xbox One, granting players unlimited access to a variety of EA's games, for only $4.99 per month.
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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 several positive factors, 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, attractive valuation levels and good cash flow from operations. 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:
- GME's revenue growth has slightly outpaced the industry average of 0.6%. Since the same quarter one year prior, revenues slightly increased by 7.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- GAMESTOP CORP has improved earnings per share by 28.3% 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 company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Specialty Retail industry average. The net income increased by 24.5% when compared to the same quarter one year prior, going from $54.60 million to $68.00 million.
- Net operating cash flow has increased to -$277.20 million or 16.35% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -3.34%.
- You can view the full analysis from the report here: GME Ratings Report