Ahead of the Bell: GameStop

GameStop raised its fourth-quarter profit forecast Tuesday, but the new forecast is below Wall Street estimates. With the Sony PlayStation 3 and Nintendo Wii game systems now in their fourth quarter of sales, the Grapevine, Texas, company also predicted slower sales growth at its older stores.

GameStop now expects profit of 95 cents to 97 cents per share in the quarter, while analysts polled by Thomson Financial expected $1.01 per share.

Shares declined 3.7 percent Tuesday, closing at $51.01.

In a note to clients Wednesday, Bear Stearns analyst Edward Urban said GameStop is being conservative, and investors overreacted to the forecast. He thinks the stock will rise to $75 per share by the end of 2008, as GameStop expects to open about 550 stores during the year, and software sales are growing.

SunTrust Robinson Humphrey analyst David Magee said GameStop's profit should grow quickly over the next few years.

"There is the perception that GameStop is close to peak earnings levels despite the fact that several of the later generation platforms are barely a year old," he said.