GAME downgraded as UK sales continue to concern

Liberum has put its recommendation and price target under review following GAME’s pre-close trading update.

Game store front, in UK
GAME's UK sales fell more than 12% in 2016

Liberum Securities has downgraded earnings forecasts for GAME Digital Plc (LON:GMD) as it says the transitioning group’s retailing division continues to face a challenging market outlook.

At the same time Liberum analyst Tom Gadsby is also factoring in the impact of investments into GAME’s new growth areas like eSports, events and digital services.

“These investments will position the business well to exploit high growth revenue channels over the medium-term, although our downgrades will clearly be seen as disappointing by investors.,” Gadsby said in a note.

The broker cuts earnings per share forecasts for 2016 down by 15% (to 7.2p from 8.5p), while downgrades for 2017 and 2018 are more severe – with reductions of 43% and 46% to Liberum’s EPS forecasts.

Liberum has put its recommendation and price target under review following GAME’s pre-close trading update this morning.

GAME revealed an 8.6% drop in year-on-year retail sales in the 52 weeks to July 23, with a positive performance in Spain offsetting a 12.7% sales decline in the UK.

Elsewhere in the City, UBS upgraded infrastructure group Laird Plc (LON:LRD) to ‘buy’ from ‘hold’.

Power utility SSE plc (LON:SSE) was lifted to ‘neutral’ from ‘sell’ by Citigroup, which also sent United Utilities Plc (LON:UU.) in the opposite direction, to ‘sell’ from ‘neutral’.

Citi cut coal and biomass power firm Drax Plc (LON:DRX) to ‘sell’ from ‘neutral’.

Deutsche Bank sees G4S Plc (LON:GFS) as a ‘sell’.

Meanwhile, in the small caps market Peel Hunt upgraded Ithaca Energy Inc (LON:IAE) to ‘buy’ and lifted its target price to 78p from 64p. It comes as the Stella field moves towards first hydrocarbons and after the group acquire more resources in the project’s vicinity.

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