Get Ready For GameStop Earnings Results Thursday

With GameStop Corp. GME scheduled to report its fiscal fourth-quarter 2016 results after the close on March 23, Loop Capital’s Anthony Chukumba expects investors to mainly focus on “management's fiscal 2017 guidance for the core video game business; early reads on the recently introduced Nintendo Switch; and the performance of the Technology Brands and collectibles.”

The analyst maintains a Buy rating on the company, with a price target of $28.

Chukumba expects GameStop to also provide its guidance for fiscal 2017 and FQ1 2017 when it reports its FQ4 2016 results.

EPS Expectations

The analyst mentioned that the FQ4 2016 and F 2017 diluted EPS estimates were mostly in line with the consensus, at $2.30 and $3.70, respectively.

Among the key expectations for the diluted EPS for FQ4, Chukumba mentioned a 16 percent comparable store sales decline due to the persisting weakness in new video game software and hardware, a 440-bps year-on-year increase in gross margins due to a mix shift to higher margin products, as well as a 350 bps increase in SG&A (selling, general and administrative) expenses, driven by top line deleverage and continued growth of Technology Brands’ higher cost structure.

Investor Focus

“We expect investor focus to primarily be on GameStop's core video game guidance, particularly given its widely doubted prior forecast of YoY growth in F2017. We also expect investors to focus on the early results of the recently introduced Nintendo Switch hybrid console/handheld,” the analyst stated.

In addition, Chukumba expects investors to be interested in the performance of Technology Brands and collectibles.

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Xbox's Monthly Subscription Service Could Be Bad News For GameStop ______ Image Credit: By BentleyMall (Own work) [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons