To be clear, Coinstar’s Orango machine isn’t a done deal, but one of many new concept vending machines the company is considering rolling out. Coinstar remains heavily reliant on Redbox for the majority of its revenue and growth, but as consumers increasing opt for digital streaming over disc rentals, Redbox’s future seems uncertain. Investors that want to bet on the sale of refurbished electronics probably shouldn’t jump into Coinstar stock just yet (instead, the company intends to focus on its new coffee vending machines in 2013).
But if the potential is there for a healthy market, Coinstar could undercut GameStop Corp. (NYSE:GME) relatively easily. Like its Redbox kiosks to Blockbuster’s brick and mortar stores, Orango machines wouldn’t carry the overhead or staffing costs of a GameStop store.
New games could help
Ultimately, GameStop’s guidance could be key. This year looks to be the year of new consoles: Sony Corporation (ADR) (NYSE:SNE)’s Playstation 4 will hit stores this fall, while Microsoft Corporation (NASDAQ:MSFT)’s next Xbox is expected sometime this year as well. Nintendo released its Wii U last year, but the console has had few must-have games released for it. That could change this year.
Likewise, the current trend for game developers could turn around. In a note released Tuesday, analysts at Piper Jaffray upgraded EA from Neutral to Overweight. In their note, analysts cited hope for the company’s upcoming games, including Battlefield 4 and 2014 FIFA World Cup. Piper Jaffray’s new $23 price target would mean that Electronic Arts Inc. (NASDAQ:EA) shares have over 20% upside from current levels, but to buy into that logic, investors should be confident that Electronic Arts Inc. (NASDAQ:EA)’s upcoming game launches will be more successful than recent ones.
The combined effect of all those new consoles and games could juice GameStop Corp. (NYSE:GME)’s sales this fall. Investors should pay close attention to what the company says in its expectations for the holiday shopping season.
Trading GameStop ahead of earnings
So what should investors do with the stock ahead of earnings? The company’s problems seem both obvious and severe. Yet, the high short interest could cause shares to experience a rapid rally if the company can manage to beat expectations.
At this point, the risk/reward profile for GameStop seems to be to the upside. That said, many of GameStop’s suppliers — the video game makers — are expecting poor sales this quarter; how can GameStop escape that?
At any rate, GameStop looks like it will be a big mover on Thursday. The big surprise will be if the stock trades flat.
The article GameStop Will be the Stock to Watch Thursday originally appeared on Fool.com and is written by Salvatore “Sam” Mattera.
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