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Why GameStop (GME) Could Be Positioned for a Slump

Zacks Equity Research

Similar to wise buying decisions, exiting certain underperformers at the right time helps maximize portfolio returns. Selling off losers can be difficult, but if both the share price and estimates are falling, it could be time to get rid of the security before more losses hit your portfolio.

One such stock that you may want to consider dropping is GameStop Corp. GME, which has witnessed a significant price decline in the past four weeks, and it has seen negative earnings estimate revisions for the current quarter and the current year. A Zacks Rank #5 (Strong Sell) further confirms weakness in GME.

A key reason for this move has been the negative trend in earnings estimate revisions. For the full year, we have seen four estimates moving down in the past 30 days, compared with no upward revisions. This trend has caused the consensus estimate to trend lower, going from $2.14 a share a month ago to its current level of $1.55.

Also, for the current quarter, GameStop has seen two downward estimate revisions versus no revisions in the opposite direction, dragging the consensus estimate down to a loss of 1 cent a share from earnings of 30 cents over the past 30 days.  

The stock also has seen some pretty dismal trading lately, as the share price has dropped 14.9% in the past month.

GameStop Corp. Price and Consensus

GameStop Corp. Price and Consensus | GameStop Corp. Quote

So it may not be a good decision to keep this stock in your portfolio anymore, at least if you don’t have a long time horizon to wait.

If you are still interested in the Retail - Consumer Electronics industry, you may instead consider a better-ranked stock - Best Buy Co., Inc. BBY. The stock currently holds a Zacks Rank #2 (Buy) and may be a better selection at this time. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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