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8th July 2021

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Sebastian plays down Amazon impact on GameStop

Analyst doesn't expect "significant impact" on retailer's business; investors not so sure

Following the announcement yesterday that Amazon was to offer site credits for pre-owned videogames, Lazard Capital senior analyst Colin Sebastian has released an investor note for GameStop playing down, in his view, the impact the move will have on the bricks-and-mortar retail chain.

However, investors didn't necessarily agree, with GameStop's share price falling significantly further than the market average - by 14 per cent to USD 23.46.

"We do not expect a significant impact on GameStop's used business as a result of Amazon's new trade-in program," wrote Sebastian, noting that although there would be "more competition for trade-ins... GameStop used should continue to thrive.

"We believe the primary risk to GameStop from Amazon's initiative is greater competition for inventory of used games, and the potential for trade-in values to increase.

"Our survey of ten games on both sites suggests that the Amazon merchant is offering a slight premium to GameStop for a number of trade-ins. However, the Amazon initiative also requires users to mail in the game to NorAm, which will then determine the eligibility of the game to receive the trade-in value.

"We note that GameStop previously tested online trade-ins, which had limited customer acceptance due to the turnaround time required to receive store credit."

Sebastian maintained his Buy rating on the retailer, and his USD 31 price target.

Celebrating employer excellence in the video games industry

8th July 2021

Submit your company

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