GME - GameStop - well-positioned to take advantage of this video game cycle

GameStop is continuing to churn out robust sales and earnings. It is still in the early stages of its growth cycle. The company has posted a huge average surprise of 33.2% over the past four quarters. Just over the past month, this year's earnings estimates have jumped 16 cents to $2.36 per share.

Full Analysis

GameStop Corp. (GME) sells software, hardware, and game accessories for video game systems and personal computers. The company is also the largest reseller of used video games. It currently operates 5,264 retail stores across North America and Europe. GameStop makes its stores easily accessible to clients of all age groups by locating its stores within walking or biking distance.

The company has focused on high-traffic areas. Most of its stores are located in strip malls, with the remaining stores located in shopping malls. GameStop Corp. also offers strategy guides, action figures, as well as other computer and video game magazines to its customers.

GameStop will continue to benefit from the current video game cycle, which is still in the "early innings" of the game. The company is well-positioned to take advantage of this video game cycle that is being driven by next-generation video game consoles and the best video games ever designed.

The company believes that this cycle will be "deeper, wider, and longer" than any previous period of new console introductions. The company's stellar fourth quarter results were driven by new video games including Activision s Call of Duty 4: Modern Warfare, Rock Band from Electronic Arts, Assassin's Creed by Ubisoft, Nintendo's Super Mario Galaxy, and Activision's Guitar Hero III.

The great thing for GameStop is that it doesn't matter who the winners or losers are in terms of consoles or video game titles, as long as demand for games is strong. Instead of picking the winners, GameStop closely monitors the pulse of the video game world and lets its customers tell them which games to stock in stores.

In addition to the next generation video game cycle, GameStop's store expansion strategy continues to drive sales. GameStop is aggressively opening new stores in favored strip mall locations. These stores offer superior customer service and focus on trade-ins and used game sales. GME's size affords the company many competitive advantages and cost savings that should help drive solid sales growth and profit margin expansion in the years ahead.

GME has posted a huge average surprise of 33.2% over the past four quarters. Just over the past month, this year's earnings estimates have jumped 16 cents to $2.36 per share. Analysts expect a further gain of 24.3% next year. 13 out of 14 analysts raised their numbers.

Content Courtesy: Zacks Investment Research

#1 Ranked Stocks Highlight Archive
To truly take advantage of the Zacks Rank, you need to first understand how it works. That is why we created the free special report: Zacks Rank Guide: Harnessing the Power of Earnings Estimate Revisions.

| Blog Home| VitalStocks Home