Sections

GameStop: Triple-A price points are "safe"

Consumers seem happy with the $59.99 tag, but pre-owned margins are under pressure

Following the release of its record financial results yesterday GameStop has revealed that consumers seem to still be happy with the USD 59.99 price point of triple A titles in the US.

That's according to an investor note from Todd Greenwald, senior research analyst at Signal Hill, who also noted that special edition SKUs - often at far higher prices - also continued to sell well, despite the tightening economy.

He did pick up on the pre-owned gross margin, however, noting that it was "the lowest we have seen in a while, coming in at 46.4 per cent, down from 48.2 per cent last quarter and 48.0 per cent a year ago, as a result of heavy promotional activity around the holidays."

"It is not yet clear whether this will persist throughout the year, and/or margins will come under further pressure as new retailers enter the used game business," he said, but he added that GameStop's pre-owned sales did grow by 31 per cent year-on-year.

Greenwald ended his note by maintaining a Hold rating on the company: "We continue to view the story as a balance between near-term fundamentals which are holding up well, but a cloudy long-term picture threatened by new competitors in the used game space and an accelerating move towards digital distribution."

Wedbush Morgan's Michael Pachter, meanwhile, pointed to a likely increase in competition for GameStop in the future.

"We think that competition for videogame dollars is increasing," he wrote. "Several retailers are vying for used game market share, with Amazon likely to have the most impact on GameStop's business.

"The new OnLive service announced at the Game Developers Conference Tuesday night is likely to attract a great deal of publisher attention, and could cut into used game sales by single-digit percentages by the middle of next decade.

"We think that these factors will combine to limit GameStop's EPS growth after 2012, and believe that the stock should trade at a below-market multiple as a result."

That said he maintained by Buy rating for the company, as well as raising the 12-month stock price target from USD 27 to USD 33.

More stories

Activision Blizzard, EA, Sony, Microsoft included in HRC's 2020 Corporate Equality Index

Multiple gaming companies score 100% on survey of non-discrimination policies, benefits, and LGBTQ support

By Rebekah Valentine

GameStop holiday sales down 27.5% in 2019

CEO lowers full-year guidance again, maintains declining sales are reflective of market trends

By Rebekah Valentine

Latest comments

Sign in to contribute

Need an account? Register now.