Due to its low price GAME has a tendency to move about a lot, and 2017 was no different. The first half of the year was marked by a rather concerning decline, one that took the stock from an opening price of 59.5p to an all-time low of just 18.6p by early July. However, it bounced back quietly sharply in the second half, eventually closing out December at 56.5p, 5% lower than where it began.
Sadly for GAME it couldn’t carry that positive momentum into the New Year. Since 2018 started it has been on a rather awful run of form, an effectively uninterrupted decline that leaves the stock at a current trading price, and 7 month nadir, of 26.2p.
A lot of the firm’s fortunes at the moment are dependent on the availability of the Nintendo Switch. For example, while GAME announced last November that its annual group gross transaction value had fallen 2.4% to £891 million, the second half of the year saw a 6.6% increase thanks to the launch of Nintendo’s latest console (admittedly this couldn’t stop the company posting a pre-tax loss of £10 million).
The Switch, alongside the ‘continued adoption’ of the PS4 and the debut of the Xbox One X, also led to a solid Christmas performance. For the 23 weeks to 6th January group GTV rose 3.8% (0.6% in the UK and 6.6% in Spain), while for the ‘peak trading period’ to that date it was up 5.2%. However, its gross margin was down around 100 basis points across the quarter due to lower margins from hardware sales, something GAME said was being offset by ‘further cost savings’ in the UK.
The company’s also seems to tentatively be finding success beyond its basic retail offerings, with ‘pleasing progress’ in with its leisure venture BELONG arenas and the largest ever eSports event the Group has held on the horizon over the Easter weekend.
In terms of Tuesday’s half year results, investors are going to want to see an improvement on the full year pre-tax loss seen back in November. They’ll also be after the firm’s H2 outlook, which sees a decent line-up of high profile game releases like God of War, Far Cry 5, Sea of Thieves and Mario Tennis Aces.
GAME Digital plc (LON:GMDG) has a consensus rating of ‘Buy’ alongside an average target price of 52.5p.
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