GameStop turned in solid results with an increase of 18.8 percent in sales for the last quarter (compared to 2012), pushing sales to $2.11 billion. The company had a profit of $68.6 million compared to last year’s $624.3 million loss, though last year’s loss was due to a goodwill writedown of $627 million. The results were, of course, driven by sales of new software (up over 43 percent), which was led by Grand Theft Auto V. New hardware sales were up by 15.3 percent, due to the strength of the Nintendo 3DS and the 2DS.
Analysts were also bullish on GameStop’s prospects, with Baird’s Colin Sebastian putting forth a $57 price target and Wedbush Securitues’ Michael Pachter targeting $60 for GameStop shares (currently hovering around $50 per share).
Pachter did note that used game margins were a concern. “While explained well on the call, used margins were at their lowest level in 12 quarters, and the second lowest level in GameStop’s 11 year history,” Pachter said in an investment note. “It attributed weakness to mix and promotional activity, as it intentionally offered extra trade-in credits for customers buying next-gen consoles.”
GameStop’s optimism didn’t hide some key info from Pachter’s sharp gaze. “The company’s positive commentary about console launches and allocations implied that they expect robust sales, but it is clear to us that sales of current generation software have been impacted by the launches, and it is possible that current generation software sales are down by 20 percent or more in November — January, with only partial offset from next generation software sales,” Pachter said.