Thanksgiving might be over, but the hunt for deep discounts has just begun! See all of our Foolish picks for Bargain Stocks for Black Friday.
These days, many investors are scared of consumer discretionary and retail stocks. It's not so hard to find bargain stocks now that they're not all buoyed by bullishness -- but then again, with the scary economy, we all know that some stocks might not really turn out to be cheap even at horribly beaten-down levels. However, just because times are bad doesn't mean some companies won't survive and even thrive. I believe one such stock is GameStop
This year's holiday season isn't going to be heavenly for retailers -- in fact, it's looking like it will be just the opposite. Making matters worse, there really isn't any one hot toy to put under the tree this Christmas, either.
Still, I am pretty bullish on video games in both normal times and recessionary ones. Although publishers like THQ Inc.
Given the fact that video games no longer bring to mind pale geeks in dark basements, I imagine that this holiday season, some families may opt to put hot consoles under the tree instead of a huge sack of easily forgotten toys and random junk. Video game consoles from Sony
Recessions result in consumers cutting back and staying home. I wouldn't be surprised if a lot of families figure out that dropping a few hundred on a console and some fun games during the holidays can help compensate for cut movies and dinners out, making staying home on a budget a lot less dreary.
GameStop could certainly capitalize on the ever-increasing popularity of games and consoles, as well as a tendency to entertain oneself at home. As it is, it's been a popular choice for many shoppers. When my Foolish colleague Todd Wenning and I did a mall check last summer, GameStop was an outlier in an otherwise fairly deserted mall. The crowds were stuffed into GameStop. They were people of all ages, from all walks of life.
GameStop not only provides brand-new hot games, but it also allows customers to trade in and buy used games. So again, it's on top of the whole idea of frugality that's at work these days.
It's true, one can purchase video games in all kinds of venues, including discount behemoth Wal-Mart
Last but not least, GameStop's stock looks cheap as dirt, having fallen nearly 61% in the last year. It's trading at just 9 times trailing earnings, and just 7 times forward earnings. This stock has delivered 37% growth over the last five years, and analysts expect 18.5% growth over the next five. Although I have been known to look at analysts' expectations on some stocks with a skeptical eye, I have a feeling they're not overly optimistic on GameStop's future. And even if they are a bit too optimistic, the stock's been beaten down to levels where you'd think the expectation is for single-digit growth, which I find unlikely.
Oddly enough, last quarter the market punished GameStop severely, despite the fact that the retailer beat analysts' expectations. And even though the quarterly results showed a single-digit percentage increase in sales and a drop in quarterly profit, the company still expects this year's sales to increase by 20% and profits to surge by 30%.
Remember what I said about the single-digit multiples? This stock's clearly on sale, and it strikes me as a stock with an irresistible price. So if you're looking for Black Friday bargains, don't forget about GameStop.
Of course, this Black Friday, we're petitioning you to let us know what you think is the best Black Friday bargain stock of them all. If you agree that GameStop fits the bill, please go to our community intelligence database, Motley Fool CAPS, and mark it as "outperform." We'll post the results next week after all the tryptophan has worked its way out of our systems.
GameStop, Nintendo, and Activision Blizzard are Motley Fool Stock Advisor recommendations. Wal-Mart Stores and Microsoft are Motley Fool Inside Value selections. Try any of our Foolish newsletters today, free for 30 days.
More from The Motley Fool
GameStop Corp: 5 Reasons to Buy, 5 Reasons to Sell
Is the struggling video game retailer a value stock or a value trap?
GameStop Meets Its Holiday Sales Targets
The video-game retailer's holiday update paired a growth acceleration with hints of declining profit margins.
Why Facebook, Aflac, and GameStop Slumped Today
Get the scoop on why these stocks missed the big rally Friday.