Why GameStop Is Poised to Plunge

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Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, video game retailer GameStop (NYSE: GME  ) has received an alarming one-star ranking.

With that in mind, let's take a closer look at GameStop and see what CAPS investors are saying about the stock right now.

GameStop facts



Headquarters (founded)

Grapevine, Texas (1994)

Market Cap

$4.6 billion


Computer and electronics retail

Trailing-12-Month Revenue

$8.9 billion


CEO J. Paul Raines (since 2010)

CFO Robert Lloyd (since 2010)

Return on Equity (average, past 3 years)



$635.8 million / $0

Dividend Yield



Best Buy 

Wal-Mart Stores 

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 11% of the 3,174 members who have rated GameStop believe the stock will underperform the S&P 500 going forward.

Just last week, one of those Fools, Yakoloi, succinctly summed up the GameStop bear case for our community:

No matter how well run, or how solid this company is there is one thing that will KILL [GameStop]. Direct digital game sales. ... Remember what happened to Blockbuster video? When is the last time you saw Wherehouse CD store? The same thing that happened to music and movies is happening to the Video Games. Gamestop has its foot in the door of the direct digital download service but it is far too little far too late with Microsoft, Sony and other major publishers far ahead in the game. Their entire business model is backed into a shrinking corner, abandon ship!

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  • Report this Comment On May 21, 2013, at 6:31 PM, Dblant wrote:

    The analogy of Blockbuster to GameStop is a huge fallacy. Blockbuster rented movies at a premium $6-8 for a new release at a time when you could rent a RedBox for $1. Gamestop in this instance offers the cheaper alternative to a retail price, a used price. Blockbuster did not sell hardware only the media, Gamestop sells gaming consoles, controllers, battery packs, hard drives, cables cords and every other periphery item you could imagine. Gamestop also sell handheld gaming devices, phones and tablets. Both music and movies can be streamed games however HD video games cannot be streamed and require a large amount of hard-drive space; did I mention that GameStop sell hard drives?

    If anyone has seen the line that forms in front of a GameStop at midnight on a Tuesday when a new version of Call of Duty or Halo are released they will realize that console games are going no ware. The last copy of Call of Duty sold 5,600,000 million copies, and they create a new version every year and demand keeps growing.

    Future versions will be sold on Blu-Ray which means that each game could potentially be up to 50GB in size. To give you a comparison in size a typical MP3 is about 3.5MB, this means downloading a 50GB is equivalent to 14,628 MP3s. Now if every customer wanted to download the their version of Call of Duty at the same time Video game companies better buying servers and start developing infrastructure to distribute their product. Video game makers should also start targeting an audience who have the patience to wait for these games to download. It appears that the next gen consoles will have 500GB hard drives this means that a typical system will be limited to 10 50GB games if the user downloads the game as opposed to buying a disc, this point by itself will keep consumers in the GameStop stores.

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9/30/2016 4:04 PM
GME $27.59 Up +0.45 +1.66%
GameStop CAPS Rating: **