GameStop Corp (GME), Amazon.com, Inc. (AMZN): The Game Has Changed

All of the short-sellers that have been betting against GameStop Corp (NYSE:GME) in the past could have been wrong. I’ve been constantly impressed by the company’s ability to generate cash flow, and return value to shareholders. The stock has done relatively well, considering the high amount of short interest (48% of float according to Yahoo! Inc. (NASDAQ:YHOO) Finance). However, there are two challenges coming, and GameStop Corp (NYSE:GME) has not faced these issues before.

How are they holding on?
GameStop Corp (NYSE:GME) is actually doing amazingly well considering the existing threats the company faces. On the one hand, the company faces Amazon.com, Inc. (NASDAQ:AMZN) and their cut-throat pricing, and willingness to take a loss to gain market share. Amazon.com, Inc. (NASDAQ:AMZN) gets about 64% of their sales from electronics and general merchandise, and this segment grew revenue by 30% in the last quarter.

On the other hand, GameStop Corp (NYSE:GME) has to compete against Best Buy Co., Inc. (NYSE:BBY) and Wal-Mart Stores, Inc. (NYSE:WMT). Best Buy Co., Inc. (NYSE:BBY) devotes a huge section of each big box store to games. The company carries the latest consoles, hundreds of new games, and has been increasing their used game selection. However, somewhat due to Amazon.com, Inc. (NASDAQ:AMZN), and somewhat due to their own problems, consumer electronics same-store sales were down 5.4%, and entertainment sales were down 28% in the current quarter.

Walmart carries just enough games and consoles to be a pain to each of these companies. The company estimates that over 200 million people visit their stores worldwide each week. The fact is, many shoppers will buy games at Walmart because they are already in the store buying groceries and other items. Why make a separate trip to GameStop Corp (NYSE:GME) if they don’t have to?

This would be a good investment…
While the company’s total sales down 6.8%, and same-store sales down 6.7%, speaks to trouble, GameStop Corp (NYSE:GME)offers a decent value to investors. The stock pays the highest yield of the group at about 3.4%, versus 2.5% from Best Buy, 2.4% from Walmart, and nothing from Amazon.com, Inc. (NASDAQ:AMZN).

In addition, the company offers investors the best relative value of their peers. Analysts expect GameStop to increase EPS by 10% over the next few years. By comparison, Best Buy is expected to show a 3.33% decline, and Walmart is expected to see 9.29% growth, and we will get to Amazon.com, Inc. (NASDAQ:AMZN) in a minute.