Is the video game market catching a cold? Yesterday, Motley Fool Stock Advisor recommendation Electronic Arts
The news is confusing because game system suppliers cut the prices of their consoles to $150 and sales are booming -- so much so that there are shortages of the consoles. With Microsoft
Well, if you make the games -- at least the right ones -- sales can be very robust. Take-Two Interactive Software
So, from a game perspective, Electronic Arts looks to be having its own problems -- for now. But with new consoles coming that allow for more advanced game features, expect the industry giant to dust itself off and come out shooting at the competition.
On the other hand, GameStop, which competes with many retailers, including Wal-Mart and Best Buy, is looking to earn up to $1.40 a share this fiscal year (up from $1.17 last year), giving the stock a forward P/E ratio of 16.
But that good news is built on a same-store-sales expectation that runs from flat to as much as 5%. That's hardly encouraging, and it makes you wonder what will happen to sales in bad times.
Those looking to GameStop for an exposure to video gaming should consider that the sweet spot in the industry is in the game software. Players like Activision and Take-Two sell for 18 times forward earnings -- a slight premium to GameStop, but without the risk of having a Wal-Mart or Best Buy lurking the background.