Got a tip?: tips@bullonthestreet.com
Email: info@bullonthestreet.com

GameStop’s Case for a Come Back

If you play video games, or have children who play video games, you’ve probably heard of the retailer GameStop Corp. (NYSE:GME).  Their infamous model of buying and selling new and used video games and related accessories was one of the most innovative models of its time.  Sadly, gaming has turned in the direction of digital sales and downloads, and like other retailers GameStop has suffered from the e-commerce shift.

The retailer has seen explosive growth and serious price action such as back in 2005 to 2007 and than again in late 2012 to 2013.  What is interesting is these rallies in price almost coincide directly with the release of a new gaming platform or innovation, such as the Xbox 360 and Online gaming.

For example, the Xbox 360 was released to the U.S. and Canada on November 22nd, 2005, and were available around the world by early December.  In the years following the release of the Xbox 360 GameStop shares gained over 300% rallying all the way from $11.12 to highs of $46.72 by late 2007.

Again, we see a similar pattern in 2013, when Microsoft released the Xbox One and Sony released the PS4.  The idea here is that GameStop performs well when new technology is introduced to the market for them to sell.

GameStop also has caught our attention because of recent SEC filings.  A few Form 4’s were filed back in June equating to about $2 million in shares purchased by insiders as well as a 10-Q concluding with a powerful statement.  An additional four Form 4’s have been filed in the month of August.

GameStop stated that “Growth in the video game industry is generally driven by the introduction of new technology. Gaming consoles are typically launched in cycles as technological developments provide significant improvements in graphics, audio quality, game play, internet connectivity and other entertainment capabilities beyond video gaming.”

With the rise of virtual and augment reality technology and gaming platforms, we could be looking forward to similar growth in the video game industry as we saw with the start of Xbox and Playstation.

Leave a Comment