Sony Saves Trade-In Market
Sony’s announcement of used game compatibility also plays into GameStop Corp. (NYSE:GME)’sconsumer base. With over 6,600 stores in 15 countries, GameStop Corp. (NYSE:GME) is one of the biggest sellers of used games in the business. This is because GameStop Corp. (NYSE:GME) has a system where customers can trade in used games to earn credits towards new ones, which helps bring down the rather high costs of the newest games and sequels to popular franchises like Call of Duty, Assassin’s Creed, and Battlefield. In addition, GameStop Corp. (NYSE:GME) traditionally takes advantages of big launch dates, and the announcement that these two consoles will be coming out before Thanksgiving means that the company will be able to get a slice of the lucrative Black Friday electronics shopping binge, which will no doubt help the company’s profit margins as well as give them a sustained period of growth into 2014 and beyond.
Sony, GameStop Win Big
Sony and GameStop Corp. (NYSE:GME) came out of Day 1 of E3 as the big winners. Sony’s near perfect announcement of the PS4, as well as the numerous advantages it has over Microsoft’s Xbox One, could make life difficult for Microsoft going forward. This also gives Sony a big shot in the arm in regards to getting the company back to its strong suit, which is electronics, and an impressive E3 showing should make investors and gamers incredibly happy.
GameStop Corp. (NYSE:GME) also has its business model secured for the next generation, as the used game market will still be very vibrant thanks to the new PS4, and trade-ins will remain relevant. It’s also a fairly cheap buy with a forward P/E of 10.28 and operating margins of around 7%. It is still in the red in regards to profit margin, but the future looks bright for GameStop going forward.
Sony isn’t too bad either, with a forward P/E of 15.31, though its operating margins are a nerve-wracking 0.64%, with a profit margin of 0.61%. It may not seem like a hot investment, but the PS4 has great potential, and is worth investing in for the long haul.
John McKenna has no position in any stocks mentioned. The Motley Fool owns shares of GameStop and Microsoft. John is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article Showdown at E3: Part I — Battle of the Consoles originally appeared on Fool.com is written by John McKenna.
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