GameStop Expects Higher Sales in 2012: Shares Still Fall
GameStop (NYS: GME) gave a fiscal-year outlook that matched the upper end of analyst expectations, but the good news didn't last long. Reuters reports the company expects to "boost sales of used videogames and to benefit from new hardware from Nintendo." So all's well in gamers' paradise, right?
Not so fast. The good news originally gave share prices a boost, but they soon fell 6% lower.
On the same day FedEx announced it would be lowering its outlook for the rest of the year due to subdued economic growth. That got people thinking.
"We believe performance will continue to be challenged from relatively weak international economic conditions, late cycle hardware and software consumer fatigue," said National Alliance analyst Mike Hickey in an interview with Reuters.
Analysts are also concerned the rising use of tablets and smartphones will lure gamers away from traditional games and consoles. Sony PlayStation CEO Jack Tretton disagrees, saying they actually function as a launching pad for casual gamers into serious gaming.
But I digress. Microsoft (NAS: MSFT) announced it will delay the launch of its new Xbox to 2013 at the earliest, citing that they were in no rush to put their current model on the back shelf. Unfortunately for GameStop, this will mean fewer spikes of interest in acquiring the latest and greatest.
Business section: Investing ideas
What do you think will happen? Do you think the drop in share price on the same day as positive forecast announcements is fair or overly pessimistic?
Here's a list of companies with exposure to the gaming trend. How do you think they will be affected? (Click here to access free, interactive tools to analyze these ideas.)
1. Activision Blizzard (NAS: ATVI) : Publishes online, personal computer (PC), console, handheld, and mobile games of interactive entertainment worldwide. Market cap of $14.29B. Relatively low correlation to the market (beta = 0.57), which may be appealing to risk averse investors. The stock has gained 19.08% over the last year.
2. Changyou.com Limited: Develops and operates online games in the People's Republic of China. Market cap of $1.43B. The stock has had a couple of great days, gaining 5.09% over the last week.
3. Electronic Arts (NYS: EA) : Develops, markets, publishes, and distributes game software and content for video game consoles, personal computers, mobile phones, tablets and electronic readers, hand held game players, and the Internet. Market cap of $5.62B. The stock has lost 11.2% over the last year.
4. Shanda Games Limited: Engages in the development and operation of online games in the People's Republic of China. Market cap of $1.36B. The stock has had a couple of great days, gaining 8.26% over the last week.
5. GameStop: Operates as a retailer of video game products and personal computer (PC) entertainment software. Market cap of $3.16B. Might be undervalued at current levels, with a PEG ratio at 0.89, and P/FCF ratio at 4.49. The stock is a short squeeze candidate, with a short float at 40.89% (equivalent to 16.5 days of average volume). The stock has gained 10.44% over the last year.
6. International Game Technology: Designs, manufactures, and markets electronic gaming equipment and systems worldwide. Market cap of $4.85B. The stock has had a good month, gaining 13.67%.
7. Microsoft: Develops, licenses, and supports a range of software products and services for various computing devices worldwide. Market cap of $268.46B. The stock has gained 28.7% over the last year.
8. Take-Two Interactive Software (NAS: TTWO) : Develops, and distributes interactive entertainment software, hardware, and accessories worldwide. Market cap of $1.42B. The stock is a short squeeze candidate, with a short float at 17.87% (equivalent to 9.18 days of average volume). The stock has gained 3.47% over the last year.
9. Zynga: Develops, markets, and operates online social games on the Internet, social networking sites, and mobile platforms. Market cap of $10.0B. The stock has had a couple of great days, gaining 5.32% over the last week.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Rebecca Lipman does not own any of the shares mentioned above. Data sourced from Finviz.
At the time this article was published The Motley Fool owns shares of Microsoft, GameStop, and Activision Blizzard. The Fool owns shares of and has written calls on Activision Blizzard. Motley Fool newsletter services have recommended buying shares of Microsoft, Take-Two Interactive Software, and Activision Blizzard. Motley Fool newsletter services have recommended creating a bull call spread position in Microsoft. Motley Fool newsletter services have recommended writing covered calls on GameStop. Motley Fool newsletter services have recommended creating a synthetic long position in Activision Blizzard. The Motley Fool has a disclosure policy.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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