Shares of GameStop jumped in premarket trading Friday after the video game retailer said its quarterly profit more than doubled on strong sales of new consoles.
The Grapevine, Texas, company reported late Thursday that it earned $24.6 million, or 22 cents per share, in its second quarter ended Aug. 2. That's better than the average analyst estimate of 18 cents per share, according to a survey by FactSet.
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Sales increased 25 percent to $1.73 billion and also beat the Wall Street estimate of $1.64 billion. Sales in stores open at least a year — a key measure of a retailer's health — rose 21.9 percent.
GameStop credited its results to strong demand for new consoles, specifically Microsoft's Xbox One and Sony's Playstation 4. New hardware sales more than doubled, and sales in the mobile and consumer electronics segment were up 85 percent.
The company continues to expect to earn $3.40 to $3.70 per share for the full year and pegged its third-quarter profit between 58 cents and 64 cents per share. Analysts expect $3.67 per share for 2014 and 58 cents per share for the third quarter.
Shares of the company have been down nearly 18 percent in the year to date, but Sterne Agee analyst Arvind Bhatia said he expects investor skepticism toward GameStop to fade as new software sales grow more consistently and it gains share in the market for downloadable content.
"Based on historical patterns and the ongoing strength of next-gen, we believe 2015 is likely to be a breakout year for the industry, with potential for double-digit growth in new software," the analyst wrote in a note. "We believe GME's early lead on next-gen positions it really well to benefit from such trends."
He has a "Buy" rating and $52 price target on the stock.
In premarket trading, GameStop shares rose 4.7 percent, or $1.96, to $43.29.