The shares of video game retailer GameStop (GME) are sinking after the company announced that its holiday same-store sales plunged nearly 19% versus the same period a year earlier. Before GameStop made the announcement, Australian bank Macquarie downgraded the shares to Neutral from Outperform.

NEWS: GameStop announced that its same-store sales plunged 18.7% during the recently completed holiday season, versus the same period a year earlier. The company, however, noted that, "comp trends improved from November to December and are expected to continue to improve in January." Moreover, the retailer reiterated its fourth quarter earnings per share guidance of $2.23-$2.38, versus analysts' consensus estimate of $2.32.

DOWNGRADE AHEAD OF REPORT: Macquarie analyst Ben Schachter downgraded GameStop to Neutral from Outperform. The company's diversification strategy is not sufficiently promising to offset the uncertainty faced by its core business, the analyst stated. Among the negative catalysts faced by the core business are "limited visibility for new hardware and new console games" this year, "concerns on used video games" in 2017, and "limited insider buying," the analyst stated. He cut his price target on the stock to $23 from $27.

ANALYST REACTION: GameStop's worse than expected holiday sales reduce the chances that it can stabilize its core video game business in fiscal 2017, wrote Anthony Chukumba, an analyst at Loop Capital, who lowered his price target on the stock to $28 from $32. However, the analyst added that two of the company's newer businesses - Technology Brands and collectibles - performed well, indicating that its "diversification strategy is bearing fruit," according to Chukumba, who kept a Buy rating on the shares.

WHAT'S NOTABLE: Nintendo (NTDOY) announced that its console-handheld hybrid Switch gaming system will go on sale on March 3 for $299.99. That price appears to be higher than the price nearer to $250 that many were expecting, according to The Wall Street Journal.

PRICE ACTION: In morning trading, GameStop sank 9% to $22.47.

OTHERS TO WATCH: Publicly traded video game makers include Activision Blizzard (ATVI), Electronic Arts (EA), and Take-Two (TTWO).