GameStop Is Losing Game Buyers To Cloud: Analysts Project 'Another Tough Year'

Not enough gamers are making a game stop.

Shares of GameStop Corp. GME plunged Wednesday after the brick-and-mortar video game and gaming hardware retailer reported a fourth-quarter sales miss and issued lower guidance the afternoon prior.

Analysts and an industry observer followed up with dire predictions for the shopping mall mainstay.

The Analysts

Bank of America Merrill Lynch's Curtis Nagle reiterated an Underperform rating on GameStop and lowered the price target from $9 to $5.

Baird Equity Research analyst Colin Sebastian remains Neutral on GameStop with a price target lowered from $12 to $11. 

Wedbush’s Michael Pachter reiterated an Outperform rating with a price target lowered from $15 to $12.

Bank Of America 

Nagle predicts “another tough year” ahead for GameStop after what nearly everyone agrees was the company’s worst in 2018. While the weak profit numbers reported this week weren’t completely surprising, the well-below Street guidance for the coming year was, the analyst said. 

GameStop has a weak title slate for this year; declining hardware sales; continued declines in the usually profitable pre-owned games category; and too-slow growth in the collectibles segment, which GameStop had sought to make part of its reaction to shifts in the marketplace, Nagle said. 

That shift in the marketplace continues to be a problem, as more and more gaming moves to streaming and other online models that remove the need for a physical store, according to BofA. 

Baird

Sebastian said the biggest concern lies in what should be the store’s remaining bread-and-butter in a changing world: used games. Pre-owned game revenue dropped 21.3 percent year-over-year, the analyst said. 

Wedbush

Pachter found a bright side, saying GameStop should be a beneficiary from an expected refresh in consoles in 2020 or 2021, and also cited the fact that the company remains the top player in used games.

Will GameStop Survive?

Tian Wang of Gamer World News told Fox Business News that it may be tough for GameStop to survive, noting that the entire way in which people play games is changing. 

“It’s pretty safe to say that 2018 was the worst year ever in the company’s history, and it’s really because the ecosystem when it comes to the way video games are sold and distributed has changed underneath their feet,” Wang said.

Everything is going the way of cloud gaming, he said, questioning whether GameStop can find a way to keep its physical stores relevant. 

Price Action

GameStop shares were down 4.95 percent at $9.60 at the time of publication Wednesday. 

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Game Over For GameStop? BofA Turns Bearish On Video Game Retailer

Photo by Dwight Burdette/Wikimedia.