The Zacks Analyst Blog Highlights:GameStop, Microsoft, Sony, Amazon.com and Tenet Healthcare

Jan 22, 2014, 09:30 ET from Zacks Investment Research, Inc.

CHICAGO, Jan. 22, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the GameStop Corp. (NYSE: GME-Free Report), Microsoft Corp. (Nasdaq: MSFT-Free Report), Sony Corp. (NYSE: SNE-Free Report), Amazon.com Inc. (Nasdaq: AMZN-Free Report) and Tenet Healthcare Corp. (NYSE: THC-Free Report).

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Here are highlights from Tuesday's Analyst Blog:

Why Has GameStop Lost Its Sheen?

Video game retailer GameStop Corp. (NYSE: GME-Free Report) saw its market cap eroding 16.9% in the past one week after it lowered its earnings outlook.

This Grapevine, Texas-based company now projects fourth quarter earnings between $1.85 and $1.95 and fiscal year 2013 earnings in the band of $2.96 to $3.06 per share. The Zacks Consensus Estimate fell 10.3% and 6.8% to $1.92 and $3.02 for the fourth quarter and fiscal 2013, respectively in the past 7 days. This led us to downgrade GameStop from a Zacks Rank #3 (Hold) to a Zacks Rank #4 (Sell).

Shares crashed nearly 20% in a single day when the company reported sluggish sales of Microsoft Corp.'s (Nasdaq: MSFT-Free Report) Xbox 360 and Sony Corp.'s (NYSE: SNE-Free Report) PlayStation 3 software during the holiday period, which caused a 22.5% fall in new software category sales.

GameStop declared that global sales during the nine-week holiday period ended Jan 4, 2014 rose 9.3% to $3.15 billion. Total comparable-store sales rose 10.2%, marking an increase of 7.1% in the U.S. and 17.4% in international locations. The increase was driven by new video game console sales such as Xbox One and PlayStation 4 that drove a 99.8% surge in new hardware sales.

GameStop, which competes with Amazon.com Inc. (Nasdaq: AMZN-Free Report), now envisions comparable-store sales for the fourth quarter and fiscal 2013 to dovetail with the upper end of the previously provided guidance range. The company had predicted comparable-store sales to increase by 2% to 9% during the fourth quarter and by 1.5% to 4.5% during the fiscal year.

The pre-owned category sales rose 7%. Management now anticipates gross margins for the pre-owned category to be 46%–49% for the fourth quarter and the fiscal year. The Other category sales climbed 4.8%. Within this category, digital receipts increased 14.9% to $207.3 million while mobile sales witnessed a 23.8% rise to $94.8 million.

GameStop's worldwide sales through mobile, web-in-store, pick-up at store and e-Commerce inflated 57%. Sales through mobile sites rose 47%, web-in-store and pick-up at store sales together marked an increase of over 120% and sales through the company's website grew 37%.

The operator of 6,488 stores repurchased 800,500 shares at a price $49.39 per share, aggregating $39.5 million during the holiday period. The company informed that at the end of the holiday period, it still had the authorization to buy shares worth $467.1 million.

Tenet Healthcare Downgraded to Sell

Zacks Investment Research downgraded Tenet Healthcare Corp. (NYSE: THC-Free Report) to a Zacks Rank #4 (Sell) on Jan 21, 2014.

Why the Downgrade?

Tenet Healthcare delivered negative earnings surprise in three out of the last four quarters with an average surprise of -3.33%. Over the last 30 days, estimates moved downwards leading to a 1.4% decline in the Zacks Consensus Estimate for full-year 2014 to $2.72 per share. Notably, the company has been witnessing downward estimate revisions post reporting mixed third-quarter 2013 results.

Tenet Healthcare's third-quarter earnings per share of 45 cents, which although higher than the year-ago earnings, missed the Zacks Consensus Estimate by 2.2%.

Tenet Healthcare has been experiencing high levels of operating expenses for quite some time. During the last reported quarter, the company witnessed higher operating costs due to increased salaries, wages and benefits, and other operating expenses. Bad debt expenses also increased due to higher uninsured revenues. As Tenet Healthcare serves a large number of uninsured and underinsured patients with a high burden of co-payments and deductibles, and expects a high level of uncollectible accounts in the upcoming quarters, bad debt expenses are expected to rise.

Moreover, the company is facing stronger volume headwinds than when it formed the business plans. Thus, inpatient volume is expected to remain soft in the fourth quarter of 2013. Tenet Healthcare also has a high debt burden. Declining cash flows further adds to the woes. Tenet Healthcare expects adjusted EBITDA of $400–$450 million in fourth-quarter 2013 anticipating weak inpatient volume growth and a less attractive payer mix to continue through the quarter.

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