The earnings season peak is well and truly over, but there is still a smattering of interesting quarterly updates in the pipeline. One will take place on Wednesday (December 6) once the market action comes to a close and GameStop (NYSE:GME) will step up to deliver its fiscal 3Q23 (ending October 28) results.
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With software growth countering a drop in hardware, Wedbush’s Michael Pachter notes that overall industry sales were “up modestly” in 3Q23. Still, the analyst believes that GameStop “lost share and will struggle to deliver growth.”
“Hardware sales likely declined,” Pachter goes on to add, “as supply constraints eased last year and Switch demand softened, with Nintendo remaining firm on pricing.”
As for the numbers, the analyst is calling for net sales of $1,150 million, a ~3% year-over-year drop and EPS of $(0.14). Both figures are below consensus at $1,182 million (flat y/y) and $(0.09), respectively. Both are also not as good as the Q2 numbers of $1,164 million and $(0.03).
There will once again be no conference call or guide for Q4 from the video game retailer. Pachter’s Q4 outlook features a y/y revenue decline of ~3.5% to $2,149 million and EPS of $0.22. The Street’s forecast factors in a 1.3% drop compared to the year-ago period with revenues hitting $2,198 million and EPS of $0.23.
Pachter’s Black Friday checks at GameStop and other retailers suggest that this year’s software marquee release, Call of Duty: Modern Warfare III – which incidentally has become the worst-reviewed Call Of Duty game ever – has seen “softer-than-expected demand.”
“The overall slate did not appear to have as many must-have games as prior years,” Pachter notes when assessing what else was on offer. “On the hardware side, we had expected more sell-through of the Switch. Conversely, Microsoft’s Xbox Series X and Sony’s PlayStation 5 performed well, raising the potential for unfavorable margin mix shift.”
All in all, Pachter believes GameStop “continues to face obstacles to a return to sustained growth.” As such, he rates GME as Underperform (i.e., Sell). His price target of $6 suggests that shares are poised to shed about 65% of their value over the coming year.
It’s all quiet on the GME front on Wall Street right now, with Pachter’s review the sole one on record. (See GameStop stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
