Any Hope Left for GameStop Shares? (GME, BBY, TGT)

GameStop Corp. (NYSE:GME) was once King of everything video game related when it came to retail, but that's not the case anymore as its share price shows the stressed result of a competitive market.  Not only does Amazon (AMZN), Wal-Mart (WMT) sell used games and consoles but now Best Buy (BBY) has jumped on board as well as Target (TGT).

GameStop (GME) shares have inched up 6.35% from its 52-week low but is there hope that its stock has finally hit bottom?

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Despite the increased competition GameStop Corp (GME) still holds the crown as the world's largest video game retailer and has long offered trade-ins on used games and consoles for store credit. Selling used games is a big part of its business, and it has helped the retailer appeal to budget-conscious gamers in the recession.

GameStop shares closed Wednesday (Sept 1st) at $18.28, up 1.95% or 35 cents, not at all impressive considering the entire Nasdaq rallied 2.9% and the NYSE ran up 2.5%.

GameStop Corp (GME) shares have traded between $17.12 and $28.62 over the past 12 months.  GameStop shares are trading cheap (but then again what stock isn't these days) with a low P/E Ratio of 7.7 and EPS of 2.34.

Today Best Buy (BBY) Inc. announced plans to expand service that allows consumers to trade in used video games for gift cards at stores.

Competition from dominant large-box retailers is not new for GameStop.

David Cole, an analyst with strategic market research firm DFC Intelligence, says GameStop remains No. 1 in video game sales among brick-and-mortar sellers. Its greatest challengers in that market are Wal-Mart and Best Buy, which rank second and third, respectively, in video game sales.

The future is uncertain for GameStop, last month the company lowered its Q3 2010 profit estimate because of expenses connected with its new customer rewards program and its sales of downloadable content in stores, along with acquisition and investment costs.

GameStop now expects to earn 35 cents to 38 cents per share in the third quarter, down from a prior range of 38 cents to 41 cents per share. Analysts expect 41 cents per share, on average.

For the full year, the company still expects a profit of $2.58 to $2.68 per share. Analysts estimate $2.63 per share. GameStop said sales at stores open at least a year will be flat to up 2% for the year. It expects growth of 3 to 6% in the third quarter.

If you believe GameStop can turn its story around and get Wall Street's love then now is the time to buy as the stock is just 6% away from its 52-week low and appears to have hit a bottom.

Disclaimer: No positions in any of the securities mentioned in this publication.

SOURCEs: http://dallas.bizjournals.com/dallas/stories/2010/08/23/daily19.html

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