GameStop has recently benefited from the announcement that the Xbox One and PS4 PlayStation will support used games. This gives GameStop time to not only generate easy revenues from its used game sells but also to figure out what to do with itself after the Internet likely replaces physical game sells as a source of video games.

The current life expectancy of new physical game sells is around seven years, or 2,500 days, so if it looks ahead to the challenge of marketing Internet downloads, long-term prospects are good. If GameStop rests on its laurels or old business model, it could be in for a rude shock.

Right now, the company produces $500 million in free cash flow or a 10% cash flow relative to its market cap, the business is cheap, and there's a 33% short position on the company that could turn into a short squeeze if this Christmas brings a successful launch of its new products.

For the next three years, GameStop looks good. Beyond that, it depends on how the company adapts to the changes in the market. 

Blake Bos owns shares of Microsoft. The Motley Fool owns shares of GameStop and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.