Sony's been having a great day, announcing that 4.2 million PS4 units have been sold as of December and its cloud-gaming service (rebranded PlayStation Now) is finally getting ready for action, with a closed beta starting this month. That second bit of news is one that could radically transform the PlayStation ecosystem in the long run, and GameStop investors aren't reacting too kindly to the announcement.
The video game retailer's stock is trading down nearly nine percent at $43.98 as of this writing. Meanwhile, Sony and third-party companies that publish on PlayStation platforms all climbed anywhere from a few cents to almost 60 cents on the positive sales and encouraging cloud news.
While a robust cloud gaming service could hurt a retailer like GameStop eventually, right now strong sales of PS4 are nothing but a positive. Wedbush analyst Michael Pachter sent out a note to investors, commenting, "I have to laugh about this: Sony's sell-through number helps GameStop MUCH MORE than the launch of PS Now hurts them, yet GameStop shares getting hammered."
"The sell-off in GameStop shares that followed the PS Now announcement is overdone," Pachter wrote. "We expected Sony to announce a streaming gaming service ever since its acquisition of Gaikai in 2012. It is unclear which games will be available (we expect older first-party titles primarily) on the service and equally unclear what Sony intends to charge for subscriptions or for rental. Game streaming services have been spectacularly unsuccessful in the past, as evidenced by the bankruptcy of OnLive in 2012. We believe OnLive's struggles were attributable to poor uptake of the service (peaking at an estimated 300,000 users), and we believe that the lack of quality content was the main reason that the company had difficulty attracting subscribers.
"It is important to note that PS4 has no backwards compatibility with PS3 discs, meaning that the availability of PS3 digitally streamed games will not directly result in lower used sales of PS3 games to PS4 owners. GameStop's used gaming sales from PS3 discs on PS3 consoles are most likely to be impacted; however, until we know more about game availability, timing, and pricing, among other factors, we do not see a meaningfully negative impact to GameStop in the near-term. Our bias is that this service will attract fewer than 1 million subscribers, and will impact overall game sales by 1 -- 2 percent in the aggregate over the next five years."
Wedbush is maintaining an "Outperform" rating on GME with a 12-month target of $60.