It seems like we have been hearing the slow death of GameStop for years. Ever since the release of the 7th generation of consoles (PS3, Wii, Xbox 360) with an increased emphasis on digital distribution, industry analysts have been predicting the death of GameStop. Well, it’s 2013 and they are still here. And according to Wedbush Securities analyst Michael Pachter, they are not going anywhere for quite a while.
We…think that GameStop has at least 10 years of runway left in its core business. In the meantime, the company is leveraging its pre-eminent position in selling used game consoles into a strength in offering used smart phones, tablets and other consumer electronics, and we expect substantial growth from this category over the next several years. GameStop management has consistently returned the company’s free cash flow to investors, and we expect them to continue to do so, suggesting to us that EPS growth will continue for much of the next decade.
The policy changes Microsoft has made to its Xbox One in recent weeks will no doubt have a positive effect on GameStop.
With the status quo remaining largely in place for used gaming on next gen, the transition of sales from physical to digital should be quite slow. GameStop’s PowerUp Rewards program should enable continued market share gains and position it to be the ‘last man standing’ for physical sales.
GameStop is not the giant it once was, but it’s still a leader in gaming retail and looks to remain so through the 8th generation of consoles.