GameStop (GME) is a leading retailer of used video games and used video game consoles in the U.S., Canada, Australia and the UK. The company’s stock has taking a significant beating recently along with many other companies in the video game space. There are many reasons why the sector has been so weak and several other names have been hurt as well.
Electronic Arts (EA) has nearly been cut in half over the past six months. Another top player Activision (ATVI) is at the low end of an $11 to $13 six month trading range. However several of the ongoing industry wide factors driving down video game manufacturers and retailers are coming to an end. The end of this cycle and changes in the video game business have created buying opportunity in some of these companies, GameStop specifically has a huge potential upside.
The change in the video game business affecting GameStop the most was the rumor of the Sony (SNE) Playstation 4 being released as a fully online console. While game makers could still make physical disks, once the game was put into the console the player would then have to input a code to activate the game. After the code was successfully entered the game disk would only work on that specific console. This would mean gamers could no longer trade games, borrow games from friends and most importantly for GameStop, sell their used games. Read the full article here