Needham & Company maintains a 'Hold' on GameStop (GME); Adjusting Estimates Ahead of Console Refresh

May 21, 2012 7:33 AM EDT
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Needham & Company maintains a 'Hold' on GameStop (NYSE: GME).

Analyst, Sean McGowan, said, "GME reported 1Q results after pre-announcing SSS and EPS last week. 1Q sales were down 12.2% to $2.0B from $2.28B in 2011; we were expecting sales of $2.11B. SSS were down 12.5%, which was below management’s prior guidance range (-9.0% to -7.5%) and below our expectation of -8.7%. Weakness was primarily due to poor sales of physical software and consoles. Pre-owned sales continue to fuel GM expansion, and were responsible for 200bps of the 280bps improvement in GM. As previously announced, EPS for the quarter were $0.54, which was at the higher end of GME’s guidance of $0.52-0.55."

"We have taken a more cautious view of GME’s sales outlook, but recognize that several factors are favorably affecting its gross margins. In addition, the stock buyback in 1Q exceeded our estimate. We have raised our EPS estimate for 2012 from $3.10 to $3.15 because of the buyback, but have lowered our 2013 EPS estimate from $3.85 to $3.60 and our 2014 EPS estimate from $4.75 to $4.55 on significantly lower sales forecasts."

For an analyst ratings summary and ratings history on GameStop click here. For more ratings news on GameStop click here.

Shares of GameStop closed at $19.07 yesterday.

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