Why GameStop (GME) Is Falling Today

NEW YORK (TheStreet) -- GameStop (GME) fell 19.3% to $36.57 Tuesday after the video game retailer issued a downside guidance for its fourth quarter.

The retailer's guidance sees earnings per share at the high end of between $1.85 and $1.95 a share, below the Capital IQ Consensus Estimate of $2.14 a share.

Despite the downside guidance, sales increased for GameStop in the 2013 holiday sales period. Global sales totaled $3.15 billion for the period, a 9.3% increase over the same period in 2012. Those numbers are in part thanks to a 99.8% increase in new hardware sales driven by the new Microsoft (MSFT) Xbox One and Sony (SNE) PlayStation 4.

Hardware sales helped offset new software sales which declined 22.5% in the period. Pre-owned sales increased by 7%, however. Gross margins for pre-owned sales are expected to range from 46% to 49% in the fourth quarter. The company also saw a 4.8% increase in sales in the "Other" category, which includes a 23.8% increase in mobile revenue to $94.8 million.

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, solid stock price performance, reasonable valuation levels, good cash flow from operations and compelling growth in net income. We feel these strengths outweigh the fact that the company shows low profit margins."

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