PS 4 Lower Price and Game Resales Fuel Jump in GameStop (GME) Stock
Shares of GameStop Corp. (GME) closed up +2.73 or +7.80 percent to $37.72 on Tuesday after an announcement from Sony Corporation (SNE) stating that it would allow unlimited sales on used games for their upcoming PlayStation 4 gaming console. In addition, GameStop announced they would be taking pre-orders for the PS 4, one day after it announced it would take pre-orders for Microsoft's (MSFT) new Xbox 360, set to be released in November for $499.
Sony surprised attendees of the E3 videogame conference in Los Angeles yesterday, announcing the price tag on the PlayStation 4 would be $100 less than Microsoft's new Xbox 360, which will retail for $499. At the conference, PlayStation's head of U.S. Business said that the PlayStation 4 "won't impose any restrictions on used games, period." The statement got a large cheer from the audience. Daily Chart
Grapevine, Texas based GameStop Corporation is a large U.S. based multinational entertainment software and videogame retailer. The company operates more than 6,700 stores in the United States, Canada, the European Union, Scandinavia, the UK and Switzerland. The company is the result of the merger of several companies, starting in 2005 with EB Games. GameStop continued growing in 2007 by acquiring Rhino Video Games from Blockbuster, and finally in 2011, the company acquired Spawn Labs and the Impulse and Stardock game distribution platform. News of Sony not restricting used game sales is big news for GameStop, since the company derives as much as 31 percent of revenues from used game sales. GameStop stock has been fluctuating on speculation over game sale restrictions with the new Xbox and PS 4 consoles. The company has reported either lower or unchanged revenue over the last few quarters, mostly due to increased sales of mobile devices which have affected sales of traditional video games. Sony's announcement not opposing the sale of pre-owned games comes after Microsoft also gave the OK for used games and could significantly affect GameStop's bottom line. GameStop's lion share of revenue comes from selling new games, with 37 percent of income from these sales. The company's stores actually spur new game sales by allowing customers to trade in older games for new titles. In an interview with Bloomberg TV yesterday, Julian Raines, the company's chief executive officer stated that, "We'll see a rising tide as people spend more time in all forms of gaming," and that GameStop will be a "dominant" retailer for the Xbox One in all of its store locations. GameStop stock has had an impressive run up since making a low of $15.77 in July of 2012, more than doubling in price. While the company is still showing a loss of -$2.35 EPS, the release of the two major consoles by Sony and Microsoft, and the lack of restrictions on the sale of used gaming software, could put the company back in positive earnings territory, which will fuel a higher stock price. Other News About GME GameStop's a Rare Gainer in Weak Tech Session
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Sony and Microsoft battle it out on the gaming front. Copyright 2013 by InvestorGuide.com, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA InvestorGuide.com, Inc.) or its employees responsible.
Published on Jun 12, 2013
By Jay Hawk