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GameStop Corp. Message Board

  • calmdotcom calmdotcom Jul 30, 2014 7:55 AM Flag

    EA subscription service not a threat for GME: BOA Merrill

    EA subscription service a ST sentiment risk not fundamental
    We are reiterating our Buy rating on GME following the news today that EA is rolling out a beta for a new subscription based gaming service for the Xbox One (similar to the PSNow). An official launch date has not been announced but the service will be available for $4.99/month (or $30 annually) and only provides access to four titles from last year (more to be added in the future). The service also offers a 10% discount on digital content and the ability to preview games before release.
    While the EA announcement caused a 6% drop in GME shares today, we view it as another example of a headline that pressures the share price short term (i.e., MSFT's used gaming in May .13, WMT's used gaming in March .14 and PSNow in January .14) but ultimately is not a fundamental risk to GME. This is based on: 1) The service does not include new releases and we believe it will not, given the low price of the service (typically 70% of a games sales are realized in the first month; 2) not all gamers can use it due to infrastructure constraints (such as bandwidth); 3) the discount offered for digital content is below trade in value for a game and the discount offered for digital season passes at GME; and 4) we see limited impact to the used business as we believe customer crossover is limited. Also recall last week that EA called out the importance of GME in driving digital and physical content.
    Reiterate Buy as strength of cycle and GME underappreciated
    We reiterate our Buy rating and $56 PO on GME as we continue to believe that it is the best positioned player to leverage a strong gaming cycle that is still in the early stages. GME has already gained significant share in next gen categories and we expect strength to continue.

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