Investors of GameStop Corp. (NYSE:GME) have enjoyed a 50% pop since late May. While past results cannot and should not be used as an indicator of future performance, I believe there is further upside, and that the stock will continue to outperform the market.
Strong initial demand for new consoles and games
I called several random GameStop Corp. (NYSE:GME) locations throughout the country, and the results of my unofficial survey pointed to strong pre-order demand for the new Xbox One and Play Station 4 consoles. In fact, the company halted both pre-orders because demand was too high. The company has confirmed over 1 million names are waiting for a PS4 in its “first to know” list, while Xbox demand has garnered 700,000 names. Users on this list are notified when inventory is available for purchase. Analysts and gamers are expecting the console-launches to be the biggest in history.
Supply for new consoles is typically limited during the early stages of a launch. Considering GameStop Corp. (NYSE:GME)’s global distribution, significant market share, and expertise, it is likely to receive more than its fair share of inventory during the upcoming holiday season.
The high level of consumer interest is consistent with remarks from leading publishers such as Activision Blizzard, Inc. (NASDAQ:ATVI), which designs one of the best-selling game franchises of all time, Call of Duty. The newest game, entitled Call of Duty: Ghosts, is expected to gross more than $1 billion in sales, according to analysts at Wedbush.
The company plans to launch Call of Duty: Ghosts on the Xbox 360, Playstation 3, Xbox One, PlayStation 4, PC and Wii U. To match the highly-anticipated release, Activision Blizzard, Inc. (NASDAQ:ATVI) has made substantial investments to make “Ghosts” a showcase for the next-gen consoles with its own dedicated servers for the Xbox One version. In addition, it is embarking on a massive marketing campaign by teaming up with Monster Beverage.
GameStop Corp. (NYSE:GME) is offering free bonuses to clients that pre-order Call of Duty: Ghosts. Activision Blizzard, Inc. (NASDAQ:ATVI)’s site indicates that a “personalization pack” is available exclusively through GameStop pre-orders. GameStop also introduced a new policy in which gamers who purchase a copy of the game for the PS3 or Xbox will be able to upgrade that title to a PS4 or Xbox One for only $10.
Activision Blizzard, Inc. (NASDAQ:ATVI) is likely to duplicate the success that the company has seen with the previous installment of the series, Call of Duty: Black Ops II. The game grossed over $500 million in sales in the first 24 hours. Since the game was released in November 2012, shares of Activision Blizzard, Inc. (NASDAQ:ATVI) have risen 35%.
Source: Yahoo! Finance
The biggest game ever at GameStop
Take-Two Interactive Software, Inc. (NASDAQ:TTWO) is another video game publisher with well-known and popular franchises, such as Grand Theft Auto.In September, Take-Two Interactive Software, Inc. (NASDAQ:TTWO) will release the next installment, Grand Theft Auto V, on the Xbox 360 and PS3. Management feels the game will be the “biggest, most dynamic, and most diverse game the label has ever created.” Take-Two provided strong guidance that relates to pre-orders, saying “With a strong pre-order campaign, the title is lining up to be both the biggest launch in the history of the franchise and Take-Two Interactive Software, Inc. (NASDAQ:TTWO).”