Shares of GameStop skidded Friday after the video game retailer reported strong second-quarter results but gave a forecast that disappointed Wall Street.
GameStop said sales of downloadable content for "Batman: Arkham Night" and "Witcher 3" powered its results, and the company's adjusted profit and revenue came in above Wall Street estimates. But the company's forecasts for the current quarter were generally lower than analysts expected, and GameStop said it thinks sales of new software will fall compared to last year, when Activision Blizzard's game "Destiny" was launched.
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Analysts said the company's outlook was "conservative," but shares of GameStop Corp. lost $2.74, or 5.9 percent, to $43.46 in midday trading. The stock is up 28 percent in 2015.
The Grapevine, Texas-based company said its net income in the third quarter will be between 53 and 60 cents per share and it expects $1.73 billion to $1.8 billion in revenue. It said sales at stores open at least a year, a key measurement of retailer health that leaves out results from stores that recently opened or closed, should rise 1 to 4 percent.
Analysts expected earnings of 59 cents per share on $2.16 billion in revenue, according to FactSet, and they had forecast same-store sales growth of 4.5 percent.
Pacific Crest Securities analyst Evan Wilson wrote that the company's hardware and software sales were disappointing, but sales of accessories and other products countered that weakness. He, too, said there is a good chance GameStop will be able to beat the targets it set.
"GameStop seems to be taking the Street's desire for more-conservative estimates to heart," he wrote. "With a strong console cycle, release slate and growth across the business, we see high potential for upside in the second half of the year."
Wedbush analyst Michael Pachter said the video game industry is doing better this year and the schedule for new games is "loaded" in the second half of the year. He wrote that the company should surpass its estimates in the third quarter and for the full year, saying GameStop is also gaining market share.
Upcoming video game releases include "Fallout 4," ''Star Wars Battlefront" and "Halo 5: Guardians."
Stifel analyst David Schick said those new launches appear to be on schedule and that the company's profit should also get a lift from its recent purchase of Geeknet, the parent company of clothing, toys and gadgets retailer ThinkGeek.
Pachter and Wilson have ratings at the equivalent of "Buy," while Schick has a "Hold" rating on the stock.