With the weekend coming up, Foolish minds turn to thoughts of play. Of course, Fools being what they are, their thoughts can't help but think a bit further out, to Tuesday morning, and more play. For that is when Motley Fool Stock Advisor recommendation GameStop (NYSE:GME) announces its Q3 2007 earnings.

What analysts say:

  • Buy, sell, or waffle? Eighteen analysts play GameStop, with 14 buy ratings and four holds.
  • Revenue. On average, analysts expect to see sales rise 41% to $1.42 billion.
  • Earnings. Profits are predicted to more than double to $0.23 per share.

What management says:
CEO Richard Fontaine credited a confluence of "continued consumer demand for all the prevalent hardware platforms" and a series of "compelling games released during the quarter" for making Q2 "outstanding" back in August. Looking to Tuesday's results, Fontaine predicted we'll see 30% to 32% same-store sales growth translating into profits of $0.19 to $0.21 per share. Hmm. Anyone else notice that Wall Street wants at least two cents more? It gets a Fool to wondering whether this game is rigged -- a sneaking suspicion supported by the fact that one analyst (Piper Jaffray) snuck in a downgrade on the stock just ahead of earnings eve.  

What management does:
But is there something to Piper's pessimism? Gross margins have been falling at GameStop for three straight quarters, true. But operating and net margins are both heading in the opposite direction. At last report, GameStop's operating margins were sighted well north of more diversified rival retailers Amazon.com (NASDAQ:AMZN), Best Buy (NYSE:BBY), Circuit City (NYSE:CC), and Wal-Mart (NYSE:WMT).

Margins

4/06

7/06

10/06

2/07

5/07

8/07

Gross

28.7%

29.0%

29.0%

27.7%

27.3%

26.6%

Operating

6.3%

5.8%

5.8%

6.4%

6.5%

6.5%

Net

2.8%

2.3%

2.4%

3.0%

3.1%

3.2%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Up more than two times in value in its less than two years on our scorecard, GameStop has proven a stellar contributor to Motley Fool Stock Advisor's market-beating returns. But how much longer can this gamer continue whaling upon Mr. Market before getting its comeuppance?

Reviewing GameStop in an August update for Stock Advisor members, David Gardner opined that last quarter's performance was no fluke: "New titles are on the horizon, the high-margin used game segment is growing fast, and continued sales of hardware like [Nintendo's Wii, Microsoft's (NASDAQ:MSFT) Xbox 360, and Sony's (NYSE:SNE) PS3] should prove to be a boon to the company. And hey, isn't the holiday season coming up?" Indeed it is, David. But before GameStop can reach its holiday shoppers, it's got to get past a pack of overenthusiastic analysts. And to do that, it must post a new high score on Tuesday.

What did we expect out of GameStop last quarter, and what did we get when it booted up? Find out in:

Fool contributor Rich Smith does not own shares of any company named above. Why do we tell you this? Because The Motley Fool has a disclosure policy. Wal-Mart and Best Buy are Inside Value picks. Best Buy and Amazon are also Stock Advisor recommendations.