Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Is GameStop Corp. (GME) a Buy?

With the summer more or less behind us, it’s time to look ahead to see what the rest of the year may bring. The holiday season is a crucial one for many retailers, and for some, this is when most of the year’s profits stream in.

GameStop Corp. (NYSE:GME)

GameStop Corp. (NYSE:GME) is a company that tends to do more business toward the end of the year, and with two new consoles set for launch in November, it looks like the company may be looking forward to an excellent fourth quarter.

For those who may not be familiar with the company, GameStop Corp. (NYSE:GME) is one of the world’s largest video game retailers. It has more than 6,500 locations worldwide, and a market cap of $6.1 billion. The company sells new and used video games as well as hardware and accessories. The stock is up a massive 134% in the last year, and offers a 2.1% dividend yield.

Growing, somehow
While many predicted the fall of retailers like GameStop Corp. (NYSE:GME) due to the rise of e-commerce and digital piracy, this has so far not come to pass. In fact, the company seems to be holding its own pretty well. Quarterly earnings per share, while not stellar, have beaten analyst expectations for five consecutive quarters.

Recently, game sales have been picking up. According to an NDP Group report, video sales climbed 23% in August for the first monthly increase since 2011. Total video game revenue for the four-week period rose 1% to $521 million. Reportedly, releases such as ‘Madden 25’ and ‘Saints Row IV’ contributed to the industry’s strong performance. GameStop Corp. (NYSE:GME) shares reacted favorably to the news.

While the company’s first and second-quarter EPS dipped a bit compared to the previous year, earnings seem to be holding up pretty well with full-year EPS expected to grow by $0.02. The company tends to make most of its money in the fourth quarter, around the holiday season, with Q4 contributing nearly 70% of full-year EPS. The launch of two much-hyped consoles in November should boost the company’s bottom line this year.

New consoles
First up is Sony Corporation (ADR) (NYSE:SNE)‘s new PS 4, scheduled for release in mid-November. It is expected to cost around $399 in the US, making it a full $100 cheaper than the new Xbox. According to Sony, the console will be “the most powerful gaming device ever conceived.” While this statement sets the bar pretty high, the PS 4 does indeed look like it will be a beast, sporting 8 gigs of GDDR5 memory as well as eight x86-64 AMD Jaguar CPU cores.

A weak yen is expected to boost sales in the company’s gaming segment, but its latest outlook warned of lower operating results for the fiscal year ending Mar. 31.

The other contender is Microsoft Corporation (NASDAQ:MSFT)‘s Xbox One, set for release around the end of November. As mentioned above, it will be about $100 more expensive than the PS 4, while offering specs similar to the PS 4. Microsoft Corporation (NASDAQ:MSFT) initially caught a lot of heat for certain decisions surrounding the resale of used games, but has since reverted to a model more similar to Sony Corporation (ADR) (NYSE:SNE)’s. While currently still holding the No. 1 spot in terms of console sales, the PS 4 seems the console to beat this holiday season.

GameStop Corp. (NYSE:GME) recently increased its full-year earnings forecast in anticipation of these releases, on the back of a healthy quarterly beat. Additionally, the company is expected to benefit from high-profile game releases including ‘Battlefield 4’ and ‘Grand Theft Auto V.’ With pre-orders for the PS 4 streaming in, the company is now expecting full-year EPS of $3.00-$3.20 versus a previous $2.90-$3.15. In a cautious consumer-spending environment, the strong report and raised outlook were received as excellent news.

The bottom line
All is not lost for GameStop Corp. (NYSE:GME), as became clear in its most recent earnings report. New console offerings from Microsoft Corporation (NASDAQ:MSFT) and Sony Corporation (ADR) (NYSE:SNE) are furthermore expected to boost sales, especially in the all-important fourth quarter, and the company recently upped its full-year guidance. As such, the company looks like a solid pick going into the holiday season.

The article Is Gamestop a Buy Ahead of the Holiday Season? originally appeared on is written by Daniel James.

Daniel James has no position in any stocks mentioned. The Motley Fool owns shares of GameStop and Microsoft.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.