Video game and console retailer GameStop
Currently, investing in GameStop represents one of the best ways to gain exposure to the best that video gaming has to offer. After the acquisition of archrival EB Games, it's the most dominant store retailer in the land and one of the only pure-play sellers of gaming software games and hardware consoles. So investors can benefit from the surprising popularity of Nintendo's Wii, along with already-predicted solid performance of Sony's
All of the popular games will be sold through GameStop as well, so trying to pick whether Electronic Arts'
Right now, GameStop is firing on all cylinders. Today it reported an impressive 72% in full-year sales as it completed the EB Games purchase and witnessed the release of the latest generation of game consoles and related software. Diluted earnings jumped nearly 24%, and management is projecting another 30% increase for 2007. It also sees 25% earnings growth for fiscal 2008 and 2009.
Better yet, management is aggressively paying down debt and completed a two-for-one stock split earlier this month, demonstrating that stock performance is as red-hot as company growth. The stock advanced nearly 12% today after the solid earnings report, but could be set for further gains if performance comes in as currently anticipated.
In a nutshell, things look great for at least the next couple of years, but you have to wonder how online gaming will end up affecting GameStop's store base. Investors are currently shunning Blockbuster
Game consoles offer online capabilities, as well as the ability to play movies and music in a number of instances. But at some point, downloading games will reach a critical mass and become the preferred method for obtaining software. How GameStop adjusts to this reality will determine its retailing fortunes over the next five to 10 years. It'll do just fine if it uses its current strength to plan for what will inevitably occur in the industry.
For related Foolishness:
- So Which Stocks Should I Buy Now?
- Foolish Forecast: GameStop on Our Minds
- 70 Times Better Than the Next Microsoft
Microsoft is an Inside Value recommendation.
Fool contributor Ryan Fuhrmann is long shares of Blockbuster and Microsoft but has no financial interest in any other company mentioned. Feel free to email him with feedback or to discuss any companies mentioned further. The Fool has an ironclad disclosure policy.