Game Over for GameStop Corp. (GME)? Nah…It’s Ready to Go Up One Level

If such rumors actually turn out to be true, then sales of new consoles may take a hit by as much as 60% according to GameStop. If Sony and Microsoft are listening, then I doubt that they will prevent used games or altogether stop selling physical copies of games.

Moreover, downloading games, as Microsoft might be considering, would require users to be connected to the internet, and require a large amount of data transfer. This might not be too appealing for consumers. Thus, it seems highly unlikely that either Sony or Microsoft would take such a path and antagonize potential buyers.

And as far as delivering digital downloads is concerned, GameStop is already made significant progress. Its digital revenue has grown at a compounded annual rate of 48% over the past two years. PC digital download sales improve a massive 68% in the previous quarter, and in-game transaction revenue shot up 116%.

Attention!
Gaming ahead

In addition, new titles will also drive GameStop’s results later this year. The release of Battlefield IV by Electronic Arts Inc. (NASDAQ:EA), and Grand Theft Auto V by Take-Two Interactive Software, Inc. (NASDAQ:TTWO) would undoubtedly be tailwinds for GameStop. Battlefield 3 was EA’s fastest selling title, selling more than 5 million copies in a week and raking in more than $300 million during that time span. The next iteration of the highly successful game is scheduled for release this fall, and the game is already up for pre-order.

As far as Take-Two’s GTA V is concerned, expectation on the Street is that it will outsell its predecessor and might even become the best-selling game of all time.

The bottom line

With so many exciting developments on the horizon, it would be foolhardy to call GameStop’s business outdated. The company has endured troubled times, but looks well-positioned to profit from the next console cycle and blockbuster games. The stock has rallied on investor confidence, and I don’t see any reason why that confidence should waver now. Moreover, GameStop’s solid dividend yield of 4.3% and share repurchases indicate are bonuses why you should consider holding on to it.

All in all, it’s not yet game over for GameStop.

The article Game Over for GameStop? Nah…It’s Ready to Go Up One Level originally appeared on Fool.com is written by Harsh Chauhan.

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