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Lazard: GameStop Q4 Sales Could Reach $2.12bil

Lazard: GameStop Q4 Sales Could Reach $2.12bil

March 26, 2007 | By Jason Dobson

March 26, 2007 | By Jason Dobson
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More: Console/PC

In his latest note to investors, Lazard Capital Markets' analyst Colin Sebastian has predicted GameStop's strong fourth quarter earnings could reach as high as $2.12 billion. This represents the upper end of guidance and is adjusted for GameStop's recent stock split.

Following a reported 29 percent increase in sales to $1.7 billion for the 9-week holiday period earlier this year, Sebastian has commented that Lazard expects that this trend has continued into the company's fourth quarter, driven by an increasing mix of new console and handheld hardware sales, which carry lower gross margins than software and used products.

In addition, Sebastian commented that, despite any lingering risks associated with the next-generation console transition, ...we believe that positive sales trends are likely to continue through at least 2007 with a ramping installed base of new video-game consoles, ongoing positive handheld sales trends (particularly DS), a growing used business, and an improving video game release calendar.

He added that while major retailer Circuit City has begun to sell used video game software, GameStop's dominant position in the used video game market as well as its experience and track record with used product sales, its broad inventory of new and used video games, and its core video game consumer base will keep this competition from posing any threat in the short term.

However, as usual the analyst conceded that the firm's predictions regarding share price and financial results for the retailer could be influenced by a number of possible risk factors. These include slower than expected consumer demand for video game hardware and software, as well as competition and faster than expected user adoption of digital download alternatives.

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