Do GameStop Corp. (GME) Investors Have Any Hope?

Page 1 of 2

GameStop Corp. (NYSE:GME) was once a sixty-dollar stock, riding the videogame industry to stellar returns in the middle part of last decade. Over the past five years, though, shares have been literally cut in half. There have been a number of factors responsible for this decline, but it all starts with the videogame industry’s secular bearishness.

Consider the following statistic: December videogame retail sales—as measured by NPD Group—fell 22%, marking a twelfth straight month of decline. On the whole, sales fell from roughly $17 billion in 2011 to $13.3 billion this past year. In 2008, industry wide sales eclipsed $20 billion.

GameStop Corp. (NYSE:GME)

Reasons for this downtrend range from a lack of next generation console hardware to increased competition via mobile apps, but its effects aren’t the only headwind GameStop is facing at the moment. Due to the fact that the game retailer relies so heavily on traditional brick-and-mortar customers, it is also wounded by the shift to digital downloads.

By the latter part of this decade, most analysts expect digital game sales to eclipse at least $30 billion, up $10 billion or so from today’s levels. Now, obviously, GameStop has sought to gain exposure in this arena, but its efforts haven’t been enough to warrant investors’ optimism. The company did acquire PC digital merchant Impulse in 2011, but it’s dwarfed by Valve Steam, and does not give GameStop any way to tackle the console industry.

Going forward, a second tier positioning in PC digital delivery is not enough for GameStop to return to its mid-2000s era heights, and the sell-side looks to agree; analysts expect the company’s bottom line to shrink by 9% over the next year. Over the longer run, as we head into the next generation of consoles, it’s evident that the manufacturers—Microsoft Corporation (NASDAQ:MSFT) and Sony Corporation (NYSE:SNE), most notably—will offer gamers the option to purchase content directly from their online stores, leaving GameStop in the dust.

What else should the company be worried about?

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Top 10 Jobs for 2014 by Salary Gain (Predictions)

Top 5 Digital Trends for 2014

Top 6 Things You Can Do To Increase Your Productivity

Top 9 Trending Smartphones in 2013

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!