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GameStop’s Earnings Report: The Battle Continues

GameStop $GME is set to report Q3 Earnings after the closing bell. GameStop is the world’s largest retail gaming destination for Xbox One X, PlayStation 4 and Nintendo Switch games, systems, consoles & accessories, which competes with Digital games and the US Supreme Court.

In the effort to put a larger emphasis on video games, GameStop has made a deal to sell its 1,289 wireless stores. The video game retailer will sell its Spring Mobile business to Prime Communications. The $700 million deal is expected to close before the end of the year, according to a company press release. The stock jumped in response to the news, indicating that investors liked the price and the fact that the retailer is exiting a business that has required significant write-down charges in recent quarters.

GameStop still expects comparable-store sales to range from flat to down 5% as adjusted earnings land somewhere between $3 and $3.35 per share. It wouldn’t come as a surprise to see major revisions to that prediction that reflect the most recent demand trends heading into the holiday season and the divestment of the Spring Mobile business.

Positive analyst sentiment has been limited for GameStop in recent years, as a shift to digital downloading, has battered the company’s core business. Shares have declined over 70% in the past 5 years, forcing management to find new ways to attract shoppers by adding more items in the vein of collectibles and apparel.

On Monday, Nov 26, $GME jumped 9% in early morning trade on Cyber Monday hopes, backed by an analyst upgrade from Bank of America Merrill Lynch. Bank of America Merrill Lynch lifted the stock to “neutral” from “underperform” as it banked on the retailer’s ability to do good on Cyber Monday.

“Even with free cash flow dwindling to under $100 million by 2020, for now, there is ample cash for capital return and we see less risk to the dividend which yields 11%,” read the analyst report.

According to NASDAQ, a positive Earnings ESP is a strong predictor of an earnings beat, particularly when combined with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).

GameStop $GME last announced its quarterly earnings data on Thursday, September 6th. The company reported EPS of $0.05, missing the consensus estimate of $0.08. The business had revenue of $1.65 billion during the quarter, compared to analysts’ expectations of $1.61 billion.

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