Baird keeps GameStop (GME) at 'Outperform' Following Q3 Results; Sees Uncertain Q4 Industry Trends
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Baird affirms GameStop (NYSE: GME) at Outperform with a price target of $25 following Q3 results and guidance announced on Tuesday night.
The firm commented today:
GameStop reported F3Q16 results in line with recently lowered expectations, and despite acknowledging that industry sales remain soft through November to-date (consistent with our field checks), management reiterated the full-year/Q4 outlook. Importantly, GameStop continues to diversify outside of physical gaming (Tech Brands now 24% of operating profits), and given attractive relative valuation (~6x FY17 EPS vs. specialty retailers at ~10x), we remain constructive at current levels for investors with longer-term time horizons.
What's wrong with holiday video game sales? Importantly, the retail environment only tells part of the story due to increasing digital mix. Additionally, we believe consumers may be delaying holiday purchases in anticipation of steeper discounts.
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