GameStop Slides on View Pandemic Will Force Store Closures

(Bloomberg) -- GameStop Corp. shares tumbled on Friday after analysts wrote that the video-game retailer would likely have to close stores in response to the coronavirus outbreak, disputing the company’s reported view that it was an “essential” retailer.

Late Thursday, Kotaku reported that GameStop believes its stores are “essential retail,” like grocery stores or pharmacies, and therefore able to remain open despite the pandemic.

“We do not believe GME qualifies as an essential retailer,” wrote Benchmark Co. analyst Mike Hickey, who added that “recent media attention will likely accelerate potential closures” at the company. He reiterated his sell rating and $3 price target, and forecast “continued weakness over the next several quarters.”

Wedbush analyst Michael Pachter wrote that “mass store closures are likely,” downgrading the stock to neutral and warning of “significant headwinds” related to the virus.

The outbreak compounds recent headwinds facing the company. GameStop has reported multiple quarters of disappointing results, called off an attempt to sell itself, and in January it lowered its guidance for the year following a steep decline in same-store sales for the holiday period.

Shares fell as much as 13% on Friday, and have dropped more than 40% from a recent peak in December.

GameStop is scheduled to report fourth-quarter results on March 26. Wall Street is looking for adjusted earnings of 77 cents a share, a consensus that has declined by more than 25% over the past three months, according to data compiled by Bloomberg. Revenue is seen falling nearly 27% from the year-ago period; the revenue consensus is down 5.2% over the past three months.

Earnings reports have been negative catalysts for the stock of late. Shares fell following 10 of the past 12 quarters, per Bloomberg data.

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