Pachter expects GameStop market share to rise

Wedbush Morgan analyst Michael Pachter has predicted that US retailer GameStop will announce an increase in market share in its first quarter results, even as it lowers its full year predictions.

With GameStop due to release its official first quarter results on Thursday, Pachter has predicted revenues of USD 2.05 billion. He also expects comparable store sales to have risen by 2 per cent, with earnings per share of USD 0.43 - both in line with the company's own guidance.

Given that the US games industry as a whole saw a decline in sales of 9 per cent during the quarter, Pachter believes that GameSpot will have seen its own market share increase during the period. He attributes this to "disproportionate allocations" of the Nintendo DSi, which are likely to have added 350 basis points to comparable store sales, with strong sales of Resident Evil 5 and Street Fighter IV adding another 150.

Despite these positive predictions Pachter expects that GameSpot may choose to lower its full year guidance, given the overall decline in industry growth. He estimates financial year 2010 comparable store sales at zero, with small declines in subsequent years due to increased competition - particularly from online distribution.

However, Pachter has retained a "Buy" recommendation for GameSpot stock, with earnings growth still predicted to grow significantly (up 25 per cent in the 2009 financial year) in the coming years, as the company focuses on higher margin new and used software.