Neutral Takeaways from GameStop's F4Q16 Earnings

Neil A. Doshi and San Q. Phan
Neil A. Doshi and San Q. Phan
March 24, 2016

MIZUHO SECURITIES USA INC.  |  US EQUITY RESEARCH

We would like to highlight some key takeaways from GameStop's 4Q earnings on March 24, 2016 for the quarter ending January 2016 as they pertain to our Interactive Entertainment coverage universe.

1) No actionable read-through for ATVI, EA, and TTWO. As for Ubisoft, GameStop did highlight Ubisoft's The Division and Far Cry Primal as two of five key titles for FY1Q16.

2) Looking ahead to its 2016 fiscal year, GameStop expects video game HW and SW sales to decline 10% and 5%-10%, respectively - this is generally in line with our expectations. We expect a decline in HW sales given this is the third year of the current console cycle and lower price points from last year. We also expect a decline in retail SW sales primarily owing to weakening Nintendo platforms (which are not material to ATVI, EA, TTWO, or UBI) and the ongoing shift towards digital distribution.

3) Although it is still too early to tell, it appears the Amazon Prime 20% discount off new games has not had a meaningful impact on GameStop. On a constant currency basis, GameStop's new video game HW sales growth of 6% and new SW sales decline of 7% was roughly in line with the overall U.S. market according to NPD Data. That said, Amazon launched the program on January 12, 2015 and we continue to believe it has broad implications for video game retailers and the software publishers.

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