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Should You Buy GameStop (GME) Stock Ahead of Earnings?
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Shares of GameStop (GME - Free Report) sunk by more than 1% on Tuesday, just one day before the video game retailer is scheduled to release its fourth quarter financial results.
As most GameStop investors know, the company has fallen on hard times recently as the market continues to shift further toward smartphone-based games and digital-only sales. In turn, GameStop has seen its stock price plummet 32.7% over the last year and 12.7% in the last four weeks alone.
However, GameStop did report strong comparable store sales growth during the holiday period, and it is diversified across consumer electronics and wireless services. The company also appointed a new CEO in early February.
With all that said, let’s take a look at some of GameStop’s current quarterly estimates to see if the company might be poised to break out of its slump.
Latest Outlook
Based on our latest Zacks Consensus Estimates, we expect GameStop to report adjusted earnings of $1.96 per share, which would mark a 17.7% decline from the year-ago period. Meanwhile, the video game retailer’s total revenues are projected to climb by 6.8% to hit $3.25 billion
Earnings ESP Whispers
Investors will also want to anticipate the likelihood that GameStop surprises investors with better-than-anticipated earnings results. For this, we turn to our Earnings ESP figure.
Zacks Earnings ESP (Expected Surprise Prediction) looks to find earnings surprises by focusing on the most recent analyst estimates. This is done because, generally speaking, when an analyst posts an estimate right before an earnings release, it means that they have fresh information which could potentially be more accurate than what analysts thought about a company two or three months ago.
A positive Earnings ESP paired with a Zacks Rank #3 (Hold) or better ranking helps us feel confident about the potential for an earnings beat. In fact, our 10-year backtest has revealed that this methodology has accurately produced a positive surprise 70% of the time.
Just one day ahead of its report, GME is sporting a Zacks Rank #4 (Sell) and an Earnings ESP of 3.57%. This ESP figure stems from the fact that GameStop’s Most Accurate Estimate for earnings sits at $2.03 per share, meaning that the most recent analyst estimates have been higher than the current consensus of $1.96 per share.
This improved outlook is a good sign heading into GME’s report, but our model does not suggest that Zacks Rank #4 (Sell) stocks are the best options ahead of earnings.
Price Performance and Surprise History
Another important thing to consider ahead of GameStop’s report is the company’s history of earnings surprises and the effect that these surprises have had on share prices.
As investors can see, GameStop has a relatively solid earnings surprise history, but its bottom-line results have not often led to upward momentum for the stock.
Past performance is clearly no barometer of future success, or failure. But in the case of GameStop, despite the company’s positive Earnings ESP figure and top-line growth projection, the stock looks like one that investors might want to stay away from.
GameStop is set to report its fourth quarter and full-year 2017 financial results after market close on Wednesday, March 28.
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It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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Should You Buy GameStop (GME) Stock Ahead of Earnings?
Shares of GameStop (GME - Free Report) sunk by more than 1% on Tuesday, just one day before the video game retailer is scheduled to release its fourth quarter financial results.
As most GameStop investors know, the company has fallen on hard times recently as the market continues to shift further toward smartphone-based games and digital-only sales. In turn, GameStop has seen its stock price plummet 32.7% over the last year and 12.7% in the last four weeks alone.
However, GameStop did report strong comparable store sales growth during the holiday period, and it is diversified across consumer electronics and wireless services. The company also appointed a new CEO in early February.
With all that said, let’s take a look at some of GameStop’s current quarterly estimates to see if the company might be poised to break out of its slump.
Latest Outlook
Based on our latest Zacks Consensus Estimates, we expect GameStop to report adjusted earnings of $1.96 per share, which would mark a 17.7% decline from the year-ago period. Meanwhile, the video game retailer’s total revenues are projected to climb by 6.8% to hit $3.25 billion
Earnings ESP Whispers
Investors will also want to anticipate the likelihood that GameStop surprises investors with better-than-anticipated earnings results. For this, we turn to our Earnings ESP figure.
Zacks Earnings ESP (Expected Surprise Prediction) looks to find earnings surprises by focusing on the most recent analyst estimates. This is done because, generally speaking, when an analyst posts an estimate right before an earnings release, it means that they have fresh information which could potentially be more accurate than what analysts thought about a company two or three months ago.
A positive Earnings ESP paired with a Zacks Rank #3 (Hold) or better ranking helps us feel confident about the potential for an earnings beat. In fact, our 10-year backtest has revealed that this methodology has accurately produced a positive surprise 70% of the time.
Just one day ahead of its report, GME is sporting a Zacks Rank #4 (Sell) and an Earnings ESP of 3.57%. This ESP figure stems from the fact that GameStop’s Most Accurate Estimate for earnings sits at $2.03 per share, meaning that the most recent analyst estimates have been higher than the current consensus of $1.96 per share.
This improved outlook is a good sign heading into GME’s report, but our model does not suggest that Zacks Rank #4 (Sell) stocks are the best options ahead of earnings.
Price Performance and Surprise History
Another important thing to consider ahead of GameStop’s report is the company’s history of earnings surprises and the effect that these surprises have had on share prices.
GameStop Corp. Price, Consensus and EPS Surprise
GameStop Corp. Price, Consensus and EPS Surprise | GameStop Corp. Quote
As investors can see, GameStop has a relatively solid earnings surprise history, but its bottom-line results have not often led to upward momentum for the stock.
Past performance is clearly no barometer of future success, or failure. But in the case of GameStop, despite the company’s positive Earnings ESP figure and top-line growth projection, the stock looks like one that investors might want to stay away from.
GameStop is set to report its fourth quarter and full-year 2017 financial results after market close on Wednesday, March 28.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>