Sterne Agee Has Buy On GameStop Corp. (GME)

Sterne Agee has a Buy rating and a $26 price target on shares of GameStop Corp. GME. In a note to clients, Sterne Agee writes, "GME reported in-line 4Q results and provided stronger than expected 2011 guidance. The earnings release and conference call appropriately focused on the company's strategy for its growing digital business. Based on current trends, it is not inconceivable that GME's digital and ecommerce business could approach $1B in a few years. At the same time, no net square footage growth is expected in the near term. We think the company will, in fact, begin rationalizing its store portfolio in the coming years. As the video game industry transitions from retail to digital, we see GME evolving with it. Meanwhile, we expect the company to generate $400M+ in annual free cash flow. Near-term catalysts: Investor day on April 1 and launch of Nintendo 3DS on March 27. Reiterating Buy rating. Target price: $26, which is based on 8.5x our new FY12 EPS estimate of $3.10." Shares of GME gained 62 cents yesterday to close at $21.73, a gain of 2.9%.