GameStop (GME) PT Lowered to $9 at Benchmark
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Benchmark analyst Mike Hickey lowered the price target on GameStop (NYSE: GME) to $9.00 (from $10.00) while maintaining a Sell rating.
Hickey commented, "Unsurprisingly, GME reduced its FY18 earnings view by 17% after weaker than anticipated new/used software sales, higher promotional expenses and a mix shift towards lower margin hardware sales. Additionally, FCF guidance was lowered from $300M to $200M, or 33%. We are modeling for prolonged financial contraction. GME appears 'lost at sea,' in our view, with a non-CEO formulating a strategy that is likely to fail over their seemingly unjustified optimism, a shareholder value-destruction strategy and a 'Hail Mary' effort to sell the remainder of the Company where we find limited reasonable financial outcomes that would encourage a potential bid. In our view, GME has become irrelevant in the video game market, as consumers accelerate the migration towards digital purchases, and as games adopt live service models that greatly extend the average play experience and where platform/publishers work towards future subscription/streaming models. GME's management team lacks investor credibility, in our view, and we expect on-going financial weakness to continue indefinitely. We believe GME has zero terminal value, and we see financial performance and valuation suffering over the long term."
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