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GameStop Stock: It Gets Worse

By Rick Munarriz - Apr 18, 2013 at 8:00PM

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Shares of GameStop hit new highs, but the future prospects of the video game retailer aren't as bright.

GameStop (GME 6.81%) is winning the game for investors these days. Shares of the leading stand-alone video game retailer hit a four-year high on Tuesday.

In this video, Rick argues that it will be all downhill from here for GameStop stock.

Bulls argue that the new console cycle will help lift GameStop's sluggish comps, but that certainly wasn't the case with the Wii U in November, and it's hard to get too excited about the next wave of shiny new systems out of Sony (SONY 1.90%) and Microsoft (MSFT 2.76%)

Sony has already announced that the PS4 will be running on a new chip architecture that prohibits compatibility with older games, and that's going to sting GameStop's resale business. Microsoft has yet to reveal specs for the heir apparent to its Xbox 360, but it's a safe bet that it will emphasize digital downloads, potentially bypassing physical retailing.

GameStop's fat dividend and attractive unit economics may seem appealing now, but it won't seem that way as store traffic starts to thin out. GameStop stock is probably going lower.

 

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Stocks Mentioned

GameStop Corp. Stock Quote
GameStop Corp.
GME
$137.21 (6.81%) $8.75
Microsoft Corporation Stock Quote
Microsoft Corporation
MSFT
$273.24 (2.76%) $7.34
Sony Corporation Stock Quote
Sony Corporation
SONY
$92.26 (1.90%) $1.72

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