Analyst: GameStop's future looks bright

Sterne Agee industry watcher says after tough 2013, growth for retailer expected in 2014 and 2015.

Profits are on the horizon for GameStop, according to Sterne Agee analyst Arvind Bhatia. In a note to investors today, the industry watcher said though 2013 may be a difficult year for the retailer, the company is well positioned to benefit from "significant console industry growth" in 2014 and 2015.

"While most investors are still skeptical about the long-term prospects of GameStop, we believe sentiment is beginning to turn positive," Bhatia said. "At a minimum, we believe the short-thesis predicated on structural concerns may take a back seat in the near-term, especially as next-gen 'used games block concerns abate."

Based on conversations with Sony executives, GameStop management said last week that it has a "high degree" of confidence that the PlayStation 4 will play used games. Microsoft's next-generation Xbox is rumored to block or in some way prevent gamers from playing secondhand titles, though this platform has not been announced.

As part of its fourth quarter and full-year earnings report last week, GameStop acknowledged the console business was "challenging" in 2012. The retailer said this trend will continue for the first half of 2013 as consumers hold off on console purchases until new platforms are available later in the year.

Not only will GameStop benefit from the upcoming console cycle, Bhatia argued, but the retailer also has two revenue streams in 2013 that it did not have during the past console transition: digital and mobile. Revenue derived from these sectors, combined with GameStop capitalizing on other opportunities, will lead to healthy growth, he argued.

"When combined with the company's focus on cost control, real estate optimization, and large stock buybacks, we believe it can show mid-to-high teens [earnings per share] growth in 2014 and 2015," Bhatia said.

Written By

Eddie Makuch is a news editor at GameSpot, and would like to see the Whalers return to Hartford.

Discussion

75 comments
Plutomeus
Plutomeus

What Gamestop is doing to the game industry is very bad. I know that Gamestop does not pay the game producers a certain percentage for every used game they sale. This is bad. They keep all profits on every used game for themselves. Some people do not understand how this is affecting the game creators and producers. We need to support the game creators. The suggestion is to lower the game prices so some people can afford it and all profits go to game creators. I hope Sony and Microsoft does this. Steam is already doing this for PC. Steam has great sales so often. Quit supporting Gamestop!  

Skullcandy
Skullcandy

Wait, do you mean to tell me that the only remaining specialized game distributor is going to continue to monopolize the sale of video games?

How do I get a job as an analyst?

Nexrad
Nexrad

Gamestop blows i dont think i am ever going to buy games from them again. Always have rude people working and they oveprice used games and make tons of money off them. You are better off buying on Ebay/Amazon or even Craigslist. There is no incentive to buy games from them anymore besides the fact that they will have a better selection than bigger retailers. thats about it.

Gamestop needs to give more incentives to preorder games from them. I can preorder anywhere else and get the same stuff, the only reason i have used them lately is because there is one very close by thats about it. If i dont preorder i dont mind waiting a few days in the mail.


plus they are idiots most of the time. All they will talk about is CoD and act like its the only game out there. Cant stand listening to them talk about garbage games and try and get me to buy them.

Crypto6969
Crypto6969

I still go to Gamestop (EB Games in Canada) first to buy my games. They are cheaper and have a better selection than Walmart and the big box electronics stores. You go to Walmart and they have a big bin of games for $15 which you know you can get the same game at Gamestop for $5 -$10 used.

Regarding used games on next gen consoles. I won't buy a next gen if it does not play used games.


maddog123
maddog123

I've had generally good experiences with Gamestop, then again I'm there a lot, and I know the dudes. The place is super corporate, and the employees have to abide by a lot of strict and unnecessary rules.

OJ_the_LION
OJ_the_LION

I've had generally positive experiences with GS, but it wasn't as good as it used to be when I left the states. You still get better deals there than you get at the (hilariously named) Hard Off or Treasure Island stores here in Japan, though.

FlameBoyBen
FlameBoyBen

sucks that everyone in the comments have had terrible customer service at gamestop (or their affiliates such as eb games).

personally my experience has been positive, hopefully gamespot can pull it together for every one else. Then we can get to what really matters....


hatting EA :P

gf61
gf61

GS has hurt the industry more than help it. Buying up video game shops to monopolize their position. If dev and console makers want to change their business model stop doing business with GS. Calvin Klein doesn't let a Thrift store order new clothes. Oh no just punish the consumers.


darlofc67
darlofc67

The concept to trade your unwanted games in for cash or towards another game is beneficial to customers, its just the likes of GAMESTOP & GAME don't do a very good job of it. But its still better than blocking pre-owned all together that way you get nothing back for your games.

Divad222
Divad222

When i was picking up ME 3 the lady was super insistent on me buying used to save 5$. But the online pass id have to buy would be 800 MSP. 

Trying to cost me more money eh? Ever since, i havnt went back there.

maximo
maximo

Not if I have anything to do with it.

These guys are leeches. 

The sales assistants are precocious kids who seem to be more interested in bombarding you with their so called gaming accomplishments.


el_swanno
el_swanno

Gamestop's future looks bright? Ha! Good one. Nice April Fool's article...

MoK86
MoK86

PLEASE SHUT DOWN GAMESTOP THEY ARE THE DEVIL!! they treat employee's like garbage and they pay like garbage SHUT THEM DOWN stop spending your hard earned money on such a scamming company like GAMESLOP

theHydra014
theHydra014

It looks bright because I foresee fire.

shinmew
shinmew

GameStop can go to %$@# for all I care.

NoelXYeul
NoelXYeul

Last week I cancelled all my preorders and put my PowerUp card in a shredder  They aren't going "to the top" with my(our) money.

xeoneex66
xeoneex66

Ya Gamestops future is bright alright as they are individually nuked out of existance...

StinkySkunkGirl
StinkySkunkGirl

I guess somebody told this analyst that GameStop can only go up from here, and he must have misinterpreted what that means.

Ravenlore_basic
Ravenlore_basic

That is too bad this leach on the Gaming business needs to die.  A better business needs to takes its place. One in which makes a small amount from games.  

The business structure is so twisted, from the CEO, Board members, .... who take a huge cut off the top, to the share holders who get a huge chunk of change. 

The losers in this set up are Developers, Publishers, and IGNORANT sellers, who get paid very little.  THESE games get sold and resold very quickly, I wonder sometime why if before 20 days if people are ready to trade in a game why they do not rent instead (though that too is not good for the industry).

The one item I'm waiting to hear is for Sony and Microsoft to announce that it is up to Publishers to decide if games are able to be resold, or if a charge for reselling the game is the way to go. 

X-Blackrose
X-Blackrose

Good. I like purchasing physical copies of video games, rather than installing digital copies.

It's nice to see GameStop (EB Games) rise. I'll continue to support them, even though I don't condone some of their business practices; one of which involves their trading system.

Though, I must be the minority since this system is still in place. I'm, honestly, shocked that people trade their games here. Has anyone ever considered Kijiji or eBay?


lordgoregore
lordgoregore

but really how can LameStop go down ? You give them $59.99+ in hops that the game you just got will not su ck and if you don't like it or whatever they will give you $20.00 for it . They are making a killing . I have found other and much better places online to use , I WILL NOT SAY HERE in the fear that gamestop will buy then out and spread their monopoly .

 It's funny how they say that used games hurt the company's that make them but when you buy a used game from gamestop they give you download codes on your recite for play online etc . How can gamestop give you NEW codes for the games after they have been used unless the game makers are in this together with gamestop ?

crunchb3rry
crunchb3rry

Used to hate Gamestop, won't shop from them, but do hope they always stick around because their need to stay in business helps us with our need to stop letting publishers turn the games industry into a machine to milk consumers for every drop.

commanderxp90
commanderxp90

Microsoft is being selfish that's why I refuse to buy xbox 360.  I go for PS4/Wii. I am glad that Sony let me play a several of used games on PS3 or next-generation of PS4.

CaptainGamespot
CaptainGamespot

not a fan of gamestop, but i do buy the occasional risky used game when I'm not sure of the quality.

Syrlink
Syrlink

New consoles this year? Is this a surprise? Doesn't seem like being an "analyst" requires more than a 3rd grade education.

Breyant
Breyant

Yeah I'm gonna say April fools on this one. With more sales going digital all the time, used games possibly being blocked, and people eventually realizing it's stupid to buy DLC at a retail store, GameStop's future looks anything but bright.

hunter8man
hunter8man

April Fools! That's a good one guys.

k2theswiss
k2theswiss

When to Gamestop to day. 60% trade in bonus FTW! got $124 off 6 games  that don't even play no more. Keep doing that Gamestop can have all my old games 

Raeldor
Raeldor

Come on, seriously?  This is just another Blockbuster waiting to happen.

Frost259
Frost259

Duh new gaming systems and games coming out and there the biggest gaming store of course sales will go up. However depending on how the used sales go Gamestop's profits may not be as great as many would think. Cause they don't make much on new items the lion share of there profits come from there used items.

Ravenlore_basic
Ravenlore_basic

@darlofc67 The concept is okay, I just don't UNDERSTAND the people who sell games to them. They pay next to nothing for the games. and sell them for 4x what they pay the person for. 

There are other ways to sell games. Unless like some have said that they are scratched games that don't work, then yes sell away. 

SoreBastard
SoreBastard

@Divad222.

That's because they don't make money on new games they make money on used ones. They don't care about the customers or their underpaid employees.

Crypto6969
Crypto6969

@X-Blackrose You are right, if Gamstop is going to give you $2 for your used game, say no, and sell it on ebay for $10.

Ravenlore_basic
Ravenlore_basic

@crunchb3rry Then We as gamers need to support Developer, and Indie games.  More people need to buy new games from a publisher that does not treat people like piggy banks to rob. 

Its hard and will never happen, and its OUR own fault, We have what we have because of our support with OUR MONEY. 

interrasteral7
interrasteral7

@commanderxp90 

I am pretty sure Microsoft allows their Xbox, Xbox 360, and will allow the eight generation Xbox to play used video games as well.

Ravenlore_basic
Ravenlore_basic

@Breyant ... YEA but the insiders need to sell off their shares at as high as price as possible. 

gf61
gf61

@k2theswiss Resold at $40-$55 each that's $240-$330 profit. At $20 each, you could've did better on Ebay.

Petman8246
Petman8246

@k2theswiss Which games makes me either impressed or disappointed.

commanderxp90
commanderxp90

@interrasteral7 @commanderxp90 True... We will see how happen in the future of next generation xbox.