Shares of video game retailer GameStop dropped nearly 13% after it reported second-quarter earnings on Thursday, recovering only slightly in Friday trading. That harsh response came despite mixed results: The company reported $1.69 billion in revenue, beating projections of $1.64 billion, but only 15 cents per share in earnings against Wall Street targets of 16 cents.
That harsh reaction may reflect ongoing skepticism of GameStop’s long-term prospects. With a business rooted in sales of new and used physical games, GameStop is threatened by the continuing rise of digital downloads, both for PCs and consoles like the Playstation 4.
But CEO Paul Raines, speaking to CNBC, argued that the markets weren’t seeing the big picture.
“We believe people are missing some of the strengths that we have,” Raines said, pointing to a “diversification journey” that included growth in the sale of collectible toys, and its push to buy up AT&T-branded wireless retail outlets. That initiative will see GameStop benefiting from a potentially huge iPhone 8 launch this fall.
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Meanwhile, the March launch of Nintendo’s Switch console is a gift that keeps on giving for GameStop’s core business. Raines said it was “the hottest launch we’ve ever had,” and helped push up global same-store sales by 1.9% in the second quarter. And while some Switch games are available for download, the console’s limited storage space and other factors may drive physical store sales.