Shares of GameStop fell sharply on Wednesday after the company reported an estimate missing fourth quarter report and also issued a lower guidance for forthcoming year. In fact, it is now safe to say that 2018 was the worst year for the company who is now struggling to keep its physical stores relevant in the age of cloud gaming.
In line with its poor performance, analysts’ price target now ranges between $5 - $12, as more and more gaming moves to streaming and other online models has made the need of physical stores redundant.
Analysts cite a variety of reasons for the company’s sales decline. The major problem seems to be its shift to the market place that had some negative implications like declining hardware sales; continued declines in the usually profitable pre-owned games category; and too-slow growth in the collectibles segment.
The company’s expertise is also in question now: used games, and whether it remains relevant in a changing video gaming and distribution practices. Pre-owned game revenue dropped 21.3% on a y-o-y basis.
Overall, GameStop is now in a spot to justify its own existence.