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GameStop vs. Best Buy: Which Retail Stock Has Better Upside?
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Key Takeaways
GameStop's gross margin rose 680 bps y/y to 34.5%, boosting adjusted EBITDA despite a 16.9% sales decline.
Best Buy trimmed its FY26 EPS view to $6.15-$6.30, citing soft demand and tariff-driven margin pressure.
GME ended Q1 with $6.4B in cash and securities, up sharply from $1B a year ago, aiding strategic flexibility.
GameStop Corp. (GME - Free Report) and Best Buy Co., Inc. (BBY - Free Report) stand at very different crossroads in the retail landscape. GameStop, once heavily dependent on physical video game sales, is in the midst of a deep structural overhaul. Best Buy, by contrast, is leaning into its role as a digital-first omnichannel electronics leader, expanding its reach through marketplace launches and high-margin media services.
In a retail environment shaped by cautious consumers, tech disruption and supply-chain volatility, investors must weigh calculated risks against steady execution. The question is simple: Which of these stocks offers the more compelling upside?
The Case for GME
GameStop is in the midst of a strategic overhaul, transitioning from a legacy video game retailer into a tech-oriented company that seeks to bridge gaming, entertainment and lifestyle retail. This pivot has been supported by investments in digital infrastructure and supply-chain modernization, along with a sharpened focus on aligning with evolving consumer preferences. The company is also working to diversify its revenue streams beyond traditional gaming through stronger merchandising and more efficient operations, which are key to long-term competitiveness in a digital-first market.
A major highlight of first-quarter fiscal 2025 was explosive growth in GameStop’s collectibles segment, which saw sales soar 54.6% year over year to $211.5 million. This category now represents 28.9% of the total revenues, nearly doubling its share from the prior year. The company’s merchandising strategy and shift toward pop culture products have started to pay off in both customer reach and margin enhancement.
Cost discipline has been a standout area of progress. GameStop reduced adjusted SG&A expenses by nearly 25% to $225.3 million, improving operational leverage as SG&A fell to 30.8% of net sales. Meanwhile, the gross margin expanded by 680 basis points to 34.5%, reflecting improved merchandising efficiency and a more favorable mix. The streamlined cost structure contributed to a turnaround in profitability, with adjusted operating income rising to $27.5 million and adjusted EBITDA reaching $38.6 million, signaling early traction in the company’s restructuring efforts.
Financially, GameStop is on firm footing. The company ended the fiscal first quarter with more than $6.4 billion in cash and securities, up significantly from $1 billion a year earlier. Post-quarter, it acquired 4,710 Bitcoins, marking a bold foray into digital assets aimed at aligning with its younger, tech-savvy consumer base. These moves demonstrate a willingness to explore unconventional growth strategies while preserving liquidity and strategic flexibility.
Yet, despite these gains, structural challenges remain. Total net sales fell 16.9% year over year to $732.4 million, led by a 31.7% drop in hardware and accessories and a 26.7% decline in software sales. Regionally, U.S. revenues fell 12.9%, and Europe and Canada saw even steeper declines. The company exited the Canada market entirely.
The Case for BBY
Best Buy continues to build on its reputation as a resilient, customer-focused tech retailer. BBY demonstrates strength in growth categories like computing, tablets, mobile phones and gaming, supported by an effective omnichannel model and digital initiatives. The combined computing and tablet categories delivered 6% comparable sales growth in first-quarter fiscal 2026.
Online sales accounted for 31.7% of domestic revenues, and nearly 60% of those orders were delivered or available for pickup within one day. The retailer is doubling down on its omnichannel capabilities with the introduction of AI-powered shopping tools and a third-party seller marketplace. These new offerings not only expand assortment but also open doors for additional ad revenues through Best Buy Ads, which saw strong vendor interest and integration with platforms like Meta and The Trade Desk.
The company is also investing heavily in customer experience, rolling out enhanced in-store zones for key categories like gaming, appliances and VR. Notably, the Switch 2 launch was supported with a unique midnight store opening, signaling Best Buy’s ability to capitalize on major product moments. These initiatives are supported by improved employee training and deep vendor partnerships, particularly with wireless carriers like Verizon and AT&T, which have helped Best Buy return to growth in mobile activations.
However, BBY is contending with renewed tariff pressures that are expected to weigh on the gross margin, particularly in the second quarter of fiscal 2026. Beyond tariff headwinds, Best Buy continues to experience soft demand in several key product categories, especially big-ticket items like home theater systems and appliances. Despite growth in computing and mobile, these higher-margin categories have lagged as consumers defer upgrades and prioritize essential spending.
Management updated its fiscal 2026 view, and expects revenues between $41.1 billion and $41.9 billion, slightly below the prior mentioned $41.4-$42.2 billion. BBY also revised its comparable sales forecast to a 1% decline to a 1% rise compared with the earlier mentioned flat to 2% growth. Best Buy envisions adjusted earnings per share between $6.15 and $6.30, slightly lower than the earlier mentioned $6.20-$6.60. While Best Buy is positioning itself well for the future, sustained recovery will depend on its ability to navigate macroeconomic headwinds while reigniting demand across its full product portfolio.
GME vs. BBY: How Do Estimates Stack Up?
The Zacks Consensus Estimate for GameStop’s fiscal 2025 sales and earnings per share (EPS) implies a year-over-year decline of 6.3% and a surge of 127.3%, respectively. The consensus estimate for EPS for the current fiscal year has increased by 28 cents in the past 60 days.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for BBY’s fiscal 2026 sales and EPS suggests year-over-year declines of 0.2% and 2.4%, respectively. The consensus estimate for EPS for the current fiscal year has moved up by 7 cents in the past 60 days.
Image Source: Zacks Investment Research
GME vs. BBY: A Look at Stock Performances
GameStop’s shares have declined 17.5% over the past three months. Meanwhile, Best Buy’s stock has risen 1.6%. While GameStop’s pullback reflects investor skepticism around its shrinking core business, revenue declines and speculative capital deployment, including its Bitcoin investment, Best Buy’s modest gain signals market confidence in its consistent execution, disciplined cost structure and strategic focus on digital transformation and high-margin initiatives such as retail media and marketplace expansion.
Image Source: Zacks Investment Research
GME vs. BBY: A Dive Into Stock Valuation
GameStop is trading at a forward price-to-sales (P/S) multiple of 3.14, above its median of 1.28 in the last three years. Best Buy’s forward 12-month P/S multiple sits at 0.34, below its median of 0.38 in the last three years.
Image Source: Zacks Investment Research
GME vs. BBY: Which is the Smarter Bet?
While both companies are navigating evolving consumer trends and economic headwinds, GameStop presents a more compelling upside opportunity at this stage. Its transformation into a tech-forward, diversified platform is showing early signs of success, supported by cost reductions, margin gains and growing traction in collectibles. Strategic bets like Bitcoin and strong cash reserves strengthen its turnaround narrative.
By comparison, Best Buy remains operationally sound but is facing slowing growth in key categories, renewed tariff headwinds and a lowered outlook for the year. While its valuation is modest, muted earnings momentum and fewer near-term catalysts limit its upside. With improving financials and a more ambitious reinvention strategy, GameStop offers a stronger risk-reward profile in the current market.
GME currently carries a Zacks Rank #3 (Hold), while BBY has a Zacks Rank #4 (Sell).
Image: Bigstock
GameStop vs. Best Buy: Which Retail Stock Has Better Upside?
Key Takeaways
GameStop Corp. (GME - Free Report) and Best Buy Co., Inc. (BBY - Free Report) stand at very different crossroads in the retail landscape. GameStop, once heavily dependent on physical video game sales, is in the midst of a deep structural overhaul. Best Buy, by contrast, is leaning into its role as a digital-first omnichannel electronics leader, expanding its reach through marketplace launches and high-margin media services.
In a retail environment shaped by cautious consumers, tech disruption and supply-chain volatility, investors must weigh calculated risks against steady execution. The question is simple: Which of these stocks offers the more compelling upside?
The Case for GME
GameStop is in the midst of a strategic overhaul, transitioning from a legacy video game retailer into a tech-oriented company that seeks to bridge gaming, entertainment and lifestyle retail. This pivot has been supported by investments in digital infrastructure and supply-chain modernization, along with a sharpened focus on aligning with evolving consumer preferences. The company is also working to diversify its revenue streams beyond traditional gaming through stronger merchandising and more efficient operations, which are key to long-term competitiveness in a digital-first market.
A major highlight of first-quarter fiscal 2025 was explosive growth in GameStop’s collectibles segment, which saw sales soar 54.6% year over year to $211.5 million. This category now represents 28.9% of the total revenues, nearly doubling its share from the prior year. The company’s merchandising strategy and shift toward pop culture products have started to pay off in both customer reach and margin enhancement.
Cost discipline has been a standout area of progress. GameStop reduced adjusted SG&A expenses by nearly 25% to $225.3 million, improving operational leverage as SG&A fell to 30.8% of net sales. Meanwhile, the gross margin expanded by 680 basis points to 34.5%, reflecting improved merchandising efficiency and a more favorable mix. The streamlined cost structure contributed to a turnaround in profitability, with adjusted operating income rising to $27.5 million and adjusted EBITDA reaching $38.6 million, signaling early traction in the company’s restructuring efforts.
Financially, GameStop is on firm footing. The company ended the fiscal first quarter with more than $6.4 billion in cash and securities, up significantly from $1 billion a year earlier. Post-quarter, it acquired 4,710 Bitcoins, marking a bold foray into digital assets aimed at aligning with its younger, tech-savvy consumer base. These moves demonstrate a willingness to explore unconventional growth strategies while preserving liquidity and strategic flexibility.
Yet, despite these gains, structural challenges remain. Total net sales fell 16.9% year over year to $732.4 million, led by a 31.7% drop in hardware and accessories and a 26.7% decline in software sales. Regionally, U.S. revenues fell 12.9%, and Europe and Canada saw even steeper declines. The company exited the Canada market entirely.
The Case for BBY
Best Buy continues to build on its reputation as a resilient, customer-focused tech retailer. BBY demonstrates strength in growth categories like computing, tablets, mobile phones and gaming, supported by an effective omnichannel model and digital initiatives. The combined computing and tablet categories delivered 6% comparable sales growth in first-quarter fiscal 2026.
Online sales accounted for 31.7% of domestic revenues, and nearly 60% of those orders were delivered or available for pickup within one day. The retailer is doubling down on its omnichannel capabilities with the introduction of AI-powered shopping tools and a third-party seller marketplace. These new offerings not only expand assortment but also open doors for additional ad revenues through Best Buy Ads, which saw strong vendor interest and integration with platforms like Meta and The Trade Desk.
The company is also investing heavily in customer experience, rolling out enhanced in-store zones for key categories like gaming, appliances and VR. Notably, the Switch 2 launch was supported with a unique midnight store opening, signaling Best Buy’s ability to capitalize on major product moments. These initiatives are supported by improved employee training and deep vendor partnerships, particularly with wireless carriers like Verizon and AT&T, which have helped Best Buy return to growth in mobile activations.
However, BBY is contending with renewed tariff pressures that are expected to weigh on the gross margin, particularly in the second quarter of fiscal 2026. Beyond tariff headwinds, Best Buy continues to experience soft demand in several key product categories, especially big-ticket items like home theater systems and appliances. Despite growth in computing and mobile, these higher-margin categories have lagged as consumers defer upgrades and prioritize essential spending.
Management updated its fiscal 2026 view, and expects revenues between $41.1 billion and $41.9 billion, slightly below the prior mentioned $41.4-$42.2 billion. BBY also revised its comparable sales forecast to a 1% decline to a 1% rise compared with the earlier mentioned flat to 2% growth. Best Buy envisions adjusted earnings per share between $6.15 and $6.30, slightly lower than the earlier mentioned $6.20-$6.60. While Best Buy is positioning itself well for the future, sustained recovery will depend on its ability to navigate macroeconomic headwinds while reigniting demand across its full product portfolio.
GME vs. BBY: How Do Estimates Stack Up?
The Zacks Consensus Estimate for GameStop’s fiscal 2025 sales and earnings per share (EPS) implies a year-over-year decline of 6.3% and a surge of 127.3%, respectively. The consensus estimate for EPS for the current fiscal year has increased by 28 cents in the past 60 days.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for BBY’s fiscal 2026 sales and EPS suggests year-over-year declines of 0.2% and 2.4%, respectively. The consensus estimate for EPS for the current fiscal year has moved up by 7 cents in the past 60 days.
Image Source: Zacks Investment Research
GME vs. BBY: A Look at Stock Performances
GameStop’s shares have declined 17.5% over the past three months. Meanwhile, Best Buy’s stock has risen 1.6%. While GameStop’s pullback reflects investor skepticism around its shrinking core business, revenue declines and speculative capital deployment, including its Bitcoin investment, Best Buy’s modest gain signals market confidence in its consistent execution, disciplined cost structure and strategic focus on digital transformation and high-margin initiatives such as retail media and marketplace expansion.
Image Source: Zacks Investment Research
GME vs. BBY: A Dive Into Stock Valuation
GameStop is trading at a forward price-to-sales (P/S) multiple of 3.14, above its median of 1.28 in the last three years. Best Buy’s forward 12-month P/S multiple sits at 0.34, below its median of 0.38 in the last three years.
Image Source: Zacks Investment Research
GME vs. BBY: Which is the Smarter Bet?
While both companies are navigating evolving consumer trends and economic headwinds, GameStop presents a more compelling upside opportunity at this stage. Its transformation into a tech-forward, diversified platform is showing early signs of success, supported by cost reductions, margin gains and growing traction in collectibles. Strategic bets like Bitcoin and strong cash reserves strengthen its turnaround narrative.
By comparison, Best Buy remains operationally sound but is facing slowing growth in key categories, renewed tariff headwinds and a lowered outlook for the year. While its valuation is modest, muted earnings momentum and fewer near-term catalysts limit its upside. With improving financials and a more ambitious reinvention strategy, GameStop offers a stronger risk-reward profile in the current market.
GME currently carries a Zacks Rank #3 (Hold), while BBY has a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.