The shares of video game retailer GameStop (GME) are falling after the company reported higher than expected second quarter profits but lower than expected revenue. However, several Wall Street analysts defended the stock, saying that the company's results should improve in the near future.

RESULTS: GameStop reported Q2 earnings per share of 27c,.in-line with the consensus outlook. However, the retailer's revenue came in at $1.63B, versus the consensus outlook of $1.72B. Moreover, its comparable store sales tumbled 10.6% versus the same period a year earlier. GameStop reiterated its fiscal 2016 EPS outlook of $3.90-$4.05, but it lowered its comp sales guidance to (4.5%) -1.5% from (3%) to flat.

ANALYSTS DEFEND STOCK: GameStop's miss was primarily driven by lower than expected hardware sales, according to Robert W. Baird analyst Colin Sebastian. However, the company also lost share in the video game market, due to ongoing negative trends, Sebastian believes. Going forward, though, the retailer should benefit from favorable seasonality, the launches of new consoles, and GameStop's acquisition of three AT&T (T) authorized retailers, the analyst stated. He trimmed his price target on the shares to $40 from $42 but recommended buying GameStop's stock on weakness. Wedbush analyst Michael Pachter called GameStop's Q2 comparative sales "disappointing," but also thinks the retailer should benefit from strong new games set to be released later this year as well as new hardware. Moreover, the stock's valuation is "compelling," and share repurchases can drive the company's EPS up to $5, he wrote. Pachter kept a $36 price target and Outperform rating on the stock. GameStop's Q2 results were hurt by tough comparisons, as the popular "Batman" video game was launched during Q2 last year and fewer new games were released last quarter than in the second quarter of 2015, wrote Piper Jaffray's Michael Olson. But the company's profit margin rose five percentage points last quarter, according to Olson. Although sales of GameStop's physical game sales are continuing to fall, its higher margin "non-physical" revenue is increasing, boosting its overall margins, the analyst explained. Going forward, GameStop should benefit from the launch of strong new games and increases in the number of consumers with consoles, stated the analyst, who kept a $41 price target and Overweight rating on the stock.

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

PRICE ACTION: In morning trading, GameStop fell about 8% to $29.61.