An Oppenheimer report from analysts following the Grapevine, Texas-based video game retailer's Thursday investor meeting gave GameStop a largely positive report, but did note some turbulence within the video game retail sector. The financial firm has listed a perform rating for GameStop.
"I think the biggest factor now, what we're seeing [in video game retail] is a lack of hit titles," Brian Nagel, one of the authors of the report, said. "[Video games are] becoming more complex, so gamers are keeping them longer." He explained that fewer marquee game releases and more tasks in a given title can mean lower revenue for stores like GameStop.
GameStop could not be reached for immediate comment.
According to Nagel, however, the company can still bring in money, crediting the GameStop management. "The company's well-run...it's a company that knows how to generate cash, they control costs," Nagel said, citing free cash flow specifically.
Oppenheimer also praised GameStop's "capital discipline." GameStop told federal regulator Securities and Exchange Commission last month it closed a $475 million debt issuance.
The report's authors said that Thursday's investor meeting turned out to be "much more than a routine business update or meet-and-greet with senior management." Nagel said GameStop management emphasized coming investments in other portions of its business, including its other brands that are sold in AT&T stores, and its ThinkGeek brand, which sells collectibles from Star Wars, Marvel comics and similar franchises.
"GameStop is clearly on a campaign to educate the market on the significant transformation occurring at the company," the report read. "Our response: We are listening."
The optimistic outlook comes amid a tough time for the specialty retail industry, with companies like Sports Authority and Pacific Sunwear (PSUN in bankruptcy and Aeropostale (ARO hiring advisory firm Stifel Financial to advise it on a sale or restructuring.
GameStop, though, is still turning a profit. While the company has yet to release first-quarter 2016 earnings, it did turn a profit of $2.92 billion for the year ending Jan. 30, an increase from $2.78 billion from the same time last year, according to regulatory filings.
GameStop shares were trading essentially flat at $31.68 in Friday afternoon trading near the close.