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MARKETS LIVE BLOG:

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Here's Why GameStop (GME) Stock Plummeted Today

Megan Sanks
Updated
Shares of GameStop Corp. (GME) tumbled 10.93% in trading on Friday, closing at $19.40 per share, after reporting worse-than-expected second quarter fiscal 2017 results.

Shares of GameStop Corp. GME tumbled 10.93% in trading on Friday, closing at $19.40 per share, after reporting worse-than-expected second quarter fiscal 2017 results.

The company reported adjusted earnings of $0.15 per share, missing the Zacks Consensus Estimate of $0.16 per share. Earnings also declined 44.4% year-over-year. The company did beat revenue expectations, recording sales of $1,678.6 million, which surpassed our estimate of $1,620 million and increased 3.4% year-over-year.

The company’s sales were boosted by Nintendo Switch sales this quarter. GameStop managed to lead market sales of the new console, and the product helped boost the company’s new video game software sales by 14.8%. Overall, comparable store sales increased 1.9%.

The video game retailer has been working to diversify itself over the last few years as consumers have moved away from their brick-and-mortar stores to online markets and digital downloads. Amazon.com AMZN, for example, owns the gaming platform Twitch.

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“We’re not happy with our stock price, and we’re doing everything we can to move it,” CEO Paul Raines said.

One way GameStop has worked to improve its sales is by growing its collectibles business. Selling mainly licensed merchandise of Pokemon and Marvel characters, the company has been gaining ground in this sector, reporting that sales grew 36% this quarter.

The company also announced on this week that Janet Bareis will join the company as the Senior Vice President of Collectibles, a newly created position. GameStop expects collectibles to expand to a $1 billion business by 2019.

GameStop remains a Zacks Rank #3 (Hold), with a VGM score of ‘B.’

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