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GameStop Turns To Mobile Devices, Collectibles As Game Sales Slip

At least three Wall Street analysts cut their price targets on GameStop ( GME ) stock on Monday, following the video game retailer’s fiscal fourth-quarter earnings and guidance. Late Thursday, GameStop delivered mixed Q4 results and current-year guidance. The Grapevine, Texas-based company also acknowledged for the first time that physical video game sales are in permanent decline. Pacific Crest Securities analyst Evan Wilson said it took several years for GameStop to admit what most industry observers already knew — that digital game downloads were cannibalizing physical game software sales. GameStop executives said diversification is now the company’s main strategy. GameStop is increasing its specialty stores that sell AT&T ( T ) and Apple ( AAPL ) products as well as outlets that sell pop-culture collectibles based on “Star Wars,” Marvel superheroes, “Game of Thrones” and other creative properties. Wilson reiterated his sector-weight rating on GameStop stock. “We remain skeptical on the collectibles business and AT&T reseller stores,” Wilson said in a research report Thursday. “These can all be fine businesses, even with better margins than the core. However, they just cannot be big enough to replace games and justify GameStop’s current market capitalization, in our view. We continue to expect it to spin its tires diversifying away from games and to underestimate the pace of negative change in the game business.” Benchmark analyst Mike Hickey on Monday reiterated his sell rating on GameStop stock and lowered his price target to 26.33 from 27.36. GameStop was down a fraction, near 30, in afternoon trading on the stock market today . GameStop Knocked As A ‘Waffle Maker Retailer’ Hickey knocked the company’s efforts to to grow sales through mobile devices and pop-culture collectables. “We remain largely unimpressed by the company’s transformation to a mobile distributor/T-shirt, bento box, waffle maker retailer,” Hickey said in a report. GameStop has an “outmoded” business model built around sales of game hardware and software using traditional retail stores, he said. Hickey says console software sales will turn completely digital within the next five years. For its fiscal fourth quarter ended Jan. 30, GameStop earned $2.40 a share, excluding items, on sales of $3.53 billion. Analysts polled by Thomson Reuters expected $2.25 a share on sales of $3.56 billion. On a year-over-year basis, GameStop EPS ex items rose 12%, but sales ticked up just 1%. Game hardware and software accounted for nearly 87% of sales in fiscal Q4. Sales of game products dropped 3.1% to $3.05 billion in Q4. Mobile and consumer electronics sales rose 16.9% to $209 million, accounting for 5.9% of Q4 revenue. Top sellers included the Apple iPhone 6S, the Apple Watch and Beats headphones. GameStop added 552 new technology brand stores last year and ended the period with 1,036 stores, including the Simply Mac and Spring Mobile chains. Sales of collectibles and other products rose 77% to $266 million, making up 7.6% of revenue. It ended the fiscal year with 35 collectibles stores worldwide, including ThinkGeek outlets. Piper Jaffray analyst Michael Olson maintained his overweight rating on GameStop stock, but cut his price target to 41 from 42. He noted that the company’s guidance for Q1 and fiscal 2016 was below consensus estimates. Wedbush analyst Michael Pachter reiterated his outperform rating on GameStop stock, but cut his price target to 36 from 38. He took a more cautious stance as the company increases its mobile phone retail business. “GameStop is a quality retailer, has a shareholder-friendly capital allocation strategy, and has prudently managed the transition from a games-only retailer to a multi-channel retailer of games, mobile hardware and services and collectibles,” he said in a research report Monday. “We expect GameStop’s core business to continue to contract, and expect its mobile and loot businesses to continue to grow.”

Tesla’s Apple, AMD Hiring Scoops Could Squeeze Chipmaker Nvidia

Tesla Motors ’ ( TSLA ) poaching of key Apple ( AAPL ) and Advanced Micro Devices ( AMD ) engineers could squeeze graphics-chips partner Nvidia ( NVDA ), an MKM analyst wrote Monday ahead of Nvidia’s April 5 analyst day. But MKM analyst Ian Ing reiterated his buy rating and 39 price target on Nvidia stock, which was up 1% in afternoon trading on the stock market today , earlier touching an eight-year high at 34.98. Nvidia and Tesla have partnered in machine-learning — widely seen as key to autonomous driving — for the better part of a decade. Last year, Nvidia’s automotive segment grew 80% — to $320 million in revenue. Together, the duo faces stiff autonomous-driving competition from rivals like General Motors ( GM ), Alphabet ( GOOGL ) and Apple. Tesla CEO Elon Musk has famously called Apple the “ Tesla graveyard,” saying Apple has hired engineers that Tesla had fired, but recent reports indicate that Tesla might be swiping Apple and AMD engineers. Still, Ing says those engineers aren’t as steeped in graphics processing units and machine learning as Nvidia’s staff. “Although there are widely reportedly headlines that Tesla has been hiring chip architects from Apple and AMD, we note that expertise has been focused more on multi-purpose application processors vs. the GPU accelerators necessary for machine learning,” Ing wrote. Nvidia stock rocketed 35% over the past month, recovering from a five-month low of 24.75, hit Feb. 12. On Feb. 17, Nvidia reported record Q4 and 2015 sales that easily topped Wall Street expectations. Core gaming brought in 58% of Nvidia’s January-quarter sales, but the chipmaker also has a bright future in virtual reality, self-driving cars, autonomous drones and cloud data center acceleration, Ing wrote. And a recent data center wave featuring Qualcomm ( QCOM ), Intel ( INTC ), Broadcom ( AVGO ), Integrated Device Technology ( IDTI ) and Inphi ( IPHI ) will likely lift Nvidia’s tide as well, Ing wrote. Last month, Nvidia noted its alliances with Chinese Internet major Alibaba ( BABA ) and Facebook ( FB ) for speedy artificial-intelligence chips. This year, Google joined Facebook’s Open Computer Project, which aims to lower the cost of data center ownership. Google also announced a beta “cloud machine learning” service that lets users customize machine learning, ahead of Amazon ( AMZN ) Web Service and Microsoft ( MSFT ) Azure. Image provided by Shutterstock .

Apple Dividend Hike May Be Next Possible Catalyst For Stock

With Apple ‘s ( AAPL ) spring product launch out of the way, Wall Street’s attention has shifted to the company’s annual capital allocation plan, including an expected dividend increase. Apple CEO Tim Cook has committed to raising the company’s dividend annually. The question now is how much that is going to be. RBC Capital Markets analyst Amit Daryanani thinks Apple could raise its dividend by 10% to 15% to get its yield above 2%. Apple also could boost its stock buyback program to $40 billion to $50 billion a year, compared with $35 billion last year, he said in a report Sunday. The buyback would enable Apple to drive EPS growth of 4% or higher in fiscal 2016 and beyond, Daryanani said. He rates Apple stock as outperform, with a price target of 130. Apple was down a fraction to 105.50 in early afternoon trading on the stock market today . Apple is expected to announce its new capital allocation program when it reports March quarter results in late April. No date has been set for the fiscal-second-quarter earnings report. Apple has increased its dividend every year for the past three years, with an average increase of about 11%. Its current quarterly dividend is 52 cents a share. Earlier this month, Piper Jaffray analyst Gene Munster predicted Apple would raise its dividend by 5% to 10%. Last week at a media event at company headquarters in Cupertino, Calif., Apple announced a new 4-inch smartphone (iPhone SE), a 9.7-inch iPad Pro tablet, a lower starting price for the Apple Watch, new watch bands and several software updates. RELATED: Apple’s Product Launch: What The Stock Market Loved And Hated Apple’s Cheap iPhone SE Raises Profit Margin Concerns .