Headquartered in Grapevine, Texas, GameStop Corporation (GME) is a digital-first omnichannel retailer, offering games and entertainment products. A Fortune 500 company, GME offers a wide variety of POP! vinyl figures, collectibles, board games, etc. Its global family of brands includes GameStop, EB Games, Micromania, ThinkGeek, and Game Informer magazine, the world’s leading print and digital video game publication.
The company started recovering this quarter with the unprecedented demand for video game consoles — Xbox Series X and S, and Sony PlayStation 5 and Sony PlayStation 5 Digital Edition — that was launched in November. GME also continued to transform its physical store presence to online stores to reduce operating costs. Moreover, the company’s investment in its web properties, and the mobile app seems to have paid off as GME witnessed an increase in its global e-commerce sales.
The company expects much better results for the current quarter ending January 2021, as the comparable store sales increased for November. The stock has gained 266.7% over the past year to close yesterday’s trading session at $20.57, after hitting its all-time high of $22.35. This impressive performance and the potential upside based on several factors have helped the stock earn a “Buy” rating in our proprietary rating system.
Here is how our proprietary POWR Ratings system evaluates GME:
Trade Grade: A
GME is currently trading above its 50-day and 200-day moving averages of $14.07 and $8.80, respectively, indicating an uptrend. Moreover, GME has gained 48% over the past month, reflecting a solid short-term bullishness.
For the third quarter ended October 2020, the company’s net sales climbed 6.7% sequentially to $1 billion. Gross profit increased by 9.6% sequentially to $276.3 million. Global e-commerce sales, representing over 18% of net sales, increased 257% year-over-year. GME’s comparable-store sales increased by 16.5% year-over-year for November 2020.
The company partnered with Vizio in November to sell its new lineup of smart TVs and soundbars. GME announced exclusive online deals during the cyber week which continued till December 5 from November 29. The company also offered a special discount of up to 50% off of its Same Day Delivery service.
On October 8, GME announced that it has entered into a multi-year strategic partnership agreement with Microsoft Corporation (MSFT) to further advance its strategy to expand its physical and digital video game offerings, as well as enhance its retail technology infrastructure.
Buy & Hold Grade: B
In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade takes into account, GME is well-positioned. The stock is currently trading 8% below its 52-week high of $22.35.
With the expansion and increasing product offerings, the company has been able to grow in the past few years.
Peer Grade: C
GME is currently ranked #13 out of 37 stocks in the Specialty Retailers industry. Other popular stocks in the specialty retailers group are Blink Charging Co. (BLNK), Party City Holdco Inc. (PRTY), and Tractor Supply Company (TSCO).
While BLNK beat GME gaining 2066.8% over the past year, PRTY and TSCO returned 195.3%, and 59.4%, respectively, over the same period.
Industry Rank: C
The Specialty Retailers industry is ranked #63 out of the 123 StockNews.com industries. The companies in this industry offer an assortment of goods from office supplies, video games, books, health supplements, and beauty supplies among others.
Amid the pandemic, several of the brick-and-mortar retail stores had to shut down. However, companies that were able to adapt to the ‘new-normal’ quickly, having an online store presence, or offering home delivery, have been able to stay afloat. With rising demand, the industry is expected to thrive even in the post-pandemic scenario.
Overall POWR Rating: B (Buy)
GME is rated “Buy” due to its short-and-long-term bullishness, and solid growth prospects, as determined by the four components of our overall POWR Rating.
Amid the pandemic, initially, the company struggled to adapt to the ‘new normal.’ However, with continuous improvement of its online store presence, GME has the potential to soar in the upcoming months despite gaining 266.7% over the past year.
The consensus revenue estimate of $1.21 billion for the quarter ending April 2021 indicates 13.5% growth from the same period last year. Its EPS is expected to grow at 72% for the quarter ending April 2021.
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GME shares were trading at $20.63 per share on Thursday morning, up $0.06 (+0.29%). Year-to-date, GME has gained 239.31%, versus a 16.59% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More…
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