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Analysts Skewer GameStop After It Lowers Forecast

November 30, 2018, 5:04 PM UTC

GameStop might be the biggest retailer in the video game space, but the company’s ongoing sales slide combined with the shifting tide in game distribution models has many analysts throwing their hands up in frustration.

The retailer announced third-quarter earnings late Thursday that topped analyst consensus estimates, but lowered its forecast for the fourth quarter, saying software sales were likely to be lower than expected.

That brought out the bears, who didn’t hold back.

“In our view, [GameStop] has become irrelevant in the video game market, as consumers accelerate the migration towards digital purchases, and as games adopt live service models that greatly extend the average play experience,” said Mike Hickey of The Benchmark Company in a note to investors. “[GameStop’s] management team lacks investor credibility, in our view, and we expect on-going financial weakness to continue indefinitely.”

Michael Pachter of Wedbush, meanwhile, said he expects a sale of the company to private equity is “imminent.”

“If the continuation of GameStop as a standalone entity were a likelihood, the company would have identified CEO candidates since the departure of its CEO over six months ago,” he said in a note to investors. “We also think that if the board’s activity was limited solely to ‘exploring’ strategic options, the company would not be precluded from buying back shares.”

GameStop has been in talks with buyers since June. While officials publicly continue to express optimism and point to the success of its ThinkGeek products division and game hardware sales, the company’s bread and butter, game software sales, has been losing steam for some time now as console makers offer digital storefronts and the industry moves toward a Netflix-like streaming/subscription model.

GameStop shares were down nearly 7% just before noon ET on Friday.