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GameStop pops despite lousy results

November 15, 2012: 12:39 PM ET

Investors appear to be betting on a Christmas miracle for GameStop.

Shares of the video game retailer were up nearly 5% in morning trading Thursday, despite a less-than-stellar quarterly report.

GameStop (GME) said it lost $624.3 million in the third quarter, while global sales declined nearly 9%.

But the company's "adjusted" results came in better than expected. Excluding certain charges, GameStop said it earned 38 cents per share, topping analysts' forecasts by 6 cents.

GameStop also maintained its outlook for full-year profits, saying it expects to report earnings per share of between $3.10 and $3.30, excluding charges. Analysts surveyed by Thomson Reuters expect $3.14 per share for the year.

The holiday season is when most retailers move into the black for the year, and video games are a big hit with the kids these days. That should be good news for GameStop, as well as game makers Electronic Arts (EA) and Activision Blizzard (ATVI).

Related: GameStop won't stop

Yet many investors on StockTwits doubt that the rally will last. One user scoffed at an attempt by CEO Paul Raines to blame the fiscal cliff for GameStop's lousy results.

ToddSullivan: RFLOL... $GME CEO blaming "fiscal cliff" ....cause we all know teenage gamers are Soooo concerned with it.

Others took issue with GameStop's expanding profit margins and the wide net it casts when forecasting its earnings for the year.

PAAResearch: Normally a decline in sales is not a driver of gross margin expansion yet $GME increased gross margins 200 bps. It wasn't all mix. Thoughts?

BrianSozzi: Gamestop has got this guidance thing down cold, toss out a silly large range and see what sticks $GME.

Another user suggested the gains were driven by reports that GameStop sold 1 million copies of "Call of Duty: Black Ops II" on Tuesday, the day the popular game debuted. It also helped that the stock appears to be relatively cheap and is also heavily shorted. So there may have been a squeeze going on as well.

MoonRock: $GME P/E 9.99 w/36+% short float & news http://stks.co/gFHa.

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Ben Rooney
Ben Rooney
Staff writer, CNNMoney

Ben Rooney is a staff writer for CNNMoney. He covers the European debt crisis and other international finance stories, in addition to writing about stocks, bonds, investing and other Wall Street-related news. Follow Ben on Twitter: @ben_rooney

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