Analyst: GameStop Could Be ‘Dominant Next-Gen Retailer’

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The following is an excerpt from a report compiled by Michael Pachter of Wedbush Securities. 

Fourth-quarter results were in line with our expectations. Revenue was $3.68 billion, versus our estimate of $3.85 billion and consensus of $3.79 billion (our estimate was not adjusted for 14- versus 13-week quarter). Revenue upside from two new consoles, with comps up 7.8 percent, versus our estimate of up 10.2 percent and guidance of up 2 percent to up 9 percent. Non-GAAP earnings per share was $1.90, compared with our estimate of $1.97, consensus of $1.93, and guidance of $1.85-$1.95. Profitability was negatively impacted by mix. In addition, the extra week last year added 8 cents to EPS.

Fiscal year 2014 guidance exceeded our bullish expectations. Initial FY:14 guidance is for revenue growth of up 8-14 percent, comps of up 6 percent to up 12 percent, and EPS of $3.40-$3.70, implying growth of 13-23 percent. We had expected a high-single-digit comps guidance range and EPS guidance of $3.37-$3.67, representing growth of 10-20 percent. We believe bullish guidance signals GameStop’s (NYSE:GME) belief in its long-term prospects, including its new business lines, such as digital, mobile, and CE. We expect GameStop to exceed its guidance by YE, as we expect software sales growth in excess of the growth implied by company guidance.

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