Shares of GameStop Corporation (GME - Analyst Report) recorded a new 52-week high of $33.26 on Apr 18, 2013, before closing at $32.68, rising roughly 28.8% year to date. Based on a current price of $32.68, GameStop is presently 2.5% above the Zacks Consensus average analyst price target of $31.89.
Moreover, it currently trades at a forward P/E of 10.60x, a 12% discount to the peer group average of 12.05x. Adding to this, the company’s long-term estimated EPS growth rate is 10.3%, which is relatively healthy.
We note that the company’s share price has been rising consistently since it reported fourth-quarter fiscal 2012 results on Mar 28. GameStop’s fourth-quarter fiscal 2012 earnings of $2.16 per share handily surpassed the Zacks Consensus Estimate of $2.09, and rose 24.9% from $1.73 earned in the prior-year quarter on the back of strong performance across digital and mobile businesses and gross margin improvement.
The company’s gross profit rose 3.4% to $974.9 million, whereas gross margin expanded 100 basis points to 27.4%. Operating income surged 36.3% to $412.3 million, while operating margin increased 310 basis points to 11.6% during the last reported quarter.
GameStop has been evolving as a mixed retailer of physical and digital gaming and electronic products. The company’s initiatives in digital, iDevice and gaming tablet businesses are expected to be accretive to its results.
GameStop is extending its mobile electronics business by providing trading services for a varied range of Android tablets. Management is banking on the rising demand for Android tablets to drive customer traffic.
The company remains well positioned to tap the growing market for video game products and PC entertainment software through store expansions in favorable localities, by providing the largest title collection of video games, and leveraging its first-to-market distribution network to offer the latest hardware and software releases.
However, GameStop forecasts a tough first half with customers postponing their purchasing activities due to the launch of console in the fourth quarter of fiscal 2013. Moreover, increased competition from Amazon.com Inc. (AMZN - Analyst Report), Best Buy Co., Inc. (BBY - Analyst Report) and Wal-Mart Stores Inc. (WMT - Analyst Report), are apprehended to mar the financials of the company.
Consequently, shares of GameStop maintain a Zacks Rank #3 (Hold).