Video game and consumer electronic retailer GameStop Corp. (NYSE:GME) was pounded down 11.16% Wednesday after it issued preliminary results for the third quarter.
The stock closed at $20.93 after trading 16.12 million shares.
Technically, GameStop shares last traded at these levels in January 2013, and what is worrying is that the stock has sliced through $24, a level that has acted as a support or resistance since 2009.
A further slide cannot be ruled out at the world’s largest videogame retailer, which is increasingly facing the heat from digital downloads that make it unnecessary for a gamer to leg it to a brick-and-mortar store.
GameStop Corp. (NYSE:GME) issues preliminary results for Q3 and 2016 guidance
Fast declining business metrics seen in the third quarter have compelled GameStop to lower its guidance for the full year 2016 in the range of $3.65 to $3.80, well below previous estimates of $3.90 to $4.05 per share. Comparable store sales are likely to fall between -9.5% to -6.5% compared to the previous forecast of a fall between -4.5% to -1.5%.
“Our expectation was that the new titles released in October would provide a catalyst for new software sales, but despite gaining market share, the titles underperformed our forecasted sales,” CEO Paul Raines said in a statement. “While the Technology Brands and Collectibles segments continue to grow rapidly, they will not offset the decline in gaming this quarter.”
On a preliminary basis, for the third quarter, GameStop expects revenue of approximately $2.0 billion, resulting in comparable store sales of -7.0% to -6.0% and third quarter diluted earnings per share estimated to be in the range of $0.45 to $0.49.
GameStop Corp. (NYSE:GME) receives negative feedback from analysts
Analysts at Piper Jaffray downgraded their rating on the stock from Overweight to Neutral and hacked down their price target from $41 to $23.
The Benchmark Company reiterated their Sell rating and chopped their price target from $24.99 to $20.67.
Clearly, analysts are turning negative about the company’s long term prospects.