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GameStop Corp. Message Board

  • calmdotcom calmdotcom Jul 7, 2014 12:08 PM Flag

    Barron's Today on GME

    Perhaps the biggest beneficiary of a rebound in software demand will be GameStop. The company's stock price has declined as investors perceive a rapid shift of game sales to digital downloads. While we believe that such a shift is underway, we expect digital sales to comprise only 10% of next-generation software sales in 2014, and to grow by 1,000 basis points per year for the next four years. As this shift occurs, we expect overall software sales to grow by a similar amount, suggesting that packaged software sales will decline by only 25% or so by 2018. We believe that GameStop's customers will largely resist digital downloads, as the typical GameStop customer perceives tremendous value in the ability to trade in a used game; as a result, we expect GameStop to gain market share of physical sales, and we think that GameStop can actually grow its game revenue for several more years. GameStop bears will point to digital sales growth, but we expect the company's earnings and cash flow to grow by $100 million or so each of the next several years, and we expect management to continue its past practice of returning the bulk of its earnings to shareholders. As such, we continue to believe that GameStop shares will appreciate for the balance of 2014.
    -- Michael Pachter
    -- Nick McKay
    -- Nick Citrin

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