Can GameStop Overcome Declines in Hardware & Software Sales?

GameStop Corp. GME reported a sharp decline in its core hardware and software segments in the first quarter of fiscal 2025, reflecting ongoing pressures in the physical gaming retail market. Hardware and accessories sales fell 31.7% year over year to $345.3 million from $505.3 million, while software sales declined 26.7% to $175.6 million from $239.7 million. Together, these segments contributed to a 16.9% drop in total net sales, which stood at $732.4 million compared to $881.8 million a year earlier.The decline in hardware and accessories suggests softer demand for consoles and related products, likely influenced by the maturity of the current console cycle, shifts in consumer spending, and the growing appeal of digital and cloud-based gaming alternatives. Similarly, the decrease in software sales highlights reduced demand for traditional physical video games, as digital downloads and streaming services continue to gain traction.Hardware accounted for 47.1% of net sales, down from 57.3%, whereas software fell to 24% from 27.2%, underscoring the shrinking contribution of GameStop’s legacy businesses. These results signal structural headwinds for GameStop’s traditional model, which remains heavily reliant on physical product sales despite industry trends favoring digital platforms. With more than 70% of its revenues still tied to declining segments, the company faces increasing pressure to modify its strategies. Sustained weakness in hardware and software sales highlights the urgency for GameStop to accelerate its diversification efforts into higher-growth areas such as collectibles and digital offerings to remain relevant in an evolving market landscape.GME’s Price Performance, Valuation & EstimatesShares of GameStop have lost 24.4% year to date against the industry’s growth of 14.5%. Image Source: Zacks Investment Research GME has underperformed its competitors, including Best Buy Co., Inc. BBY and Microsoft Corporation MSFT. Shares of Best Buy have declined 17.3%, while Microsoft shares have risen 19.3% over the same period.From a valuation standpoint, GME trades at a forward price-to-sales ratio of 3.22X, slightly below the industry’s average of 3.61X. It has a Value Score of C. GameStop is trading at a premium to Best Buy (with a forward 12-month P/S ratio of 0.36X) and at a discount to Microsoft (11.85X). Image Source: Zacks Investment Research The Zacks Consensus Estimate for GME’s fiscal 2025 earnings implies year-over-year growth of 127.3% and the same for fiscal 2026 indicates a decline of 52%. Estimates for fiscal 2025 and 2026 have been upbound 28 cents and southbound 11 cents, respectively, in the past 60 days. Image Source: Zacks Investment Research GME currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.5% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Microsoft Corporation (MSFT): Free Stock Analysis Report Best Buy Co., Inc. (BBY): Free Stock Analysis Report GameStop Corp. (GME): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks