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Analyst: GameStop to Continue Explosive Growth

Kris Graft's picture

By Kris Graft

August 4, 2008

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Grapevine, Tex.-based retailer GameStop already has over 5,000 stores worldwide, but there's still "plenty of room ... for new store openings," one analyst says.

Colin Sebastian with Lazard Capital Markets said in a Monday investor note, "We believe GameStop continues to generate positive and steady [return on investment] on new stores despite increasing penetration in North America and in some international markets."

He added, "Moreover, the company expects to maintain the current pace of approximately 500 new store openings annually over the next three to four years, with capacity in the U.S. estimated to be 50 percent higher than current levels."

The company currently employs over 44,000 full-time employees.

GameStop is continuing to expand outside of North America, establishing stores in Australia and Europe.

Sebastian also addressed digital distribution, a trend that, in the most extreme case, would cut retailers out of the revenue loop.

He said that digital distribution is a "longer-term threat" to GameStop. "...Over the next two to three years we believe the bulk of online distribution will be add-on content enhancing the experience of games purchased through the traditional retail channel."

Sebastian currently has a "buy" rating and a $61 price target for GameStop stock. Shares were down 36 cents to $39.47 in late morning trading on the New York Stock Exchange.

NickgamertagO1's picture
On August 5th NickgamertagO1 said:

Well, when it comes to trading in, gamestop rapes their customers. It'd be nice to see the attempts of large retailers like best buy or circuit city to penetrate the trade in market come to fruition so gamestop will be forced to be more competitive with their trade in values, cause they're terrible.

s2h's picture
On August 5th s2h said:

I sure hope downloadable content becomes a viable option on consoles because EB/GS have WAY to much power in the industry. I would love to see MS, Nintendo and Sony and other developers band together to neuter these dogs.

NickgamertagO1's picture
On August 5th NickgamertagO1 said:

Well, what's goig to happen is it'll be kind of a hybrid I think between retail and digital. You'll either just get a ticket with a number on it (like the current live arcade games) so you won't be able to trade them in any more because of the digital rights management. Or you'll by a dead disc that just carries the information that its only purpose is to load onto your harddrive and will carry the same digital rights management and only work on the console it was origianal downloaded on (minus hackers or whatever they can do). Again, making trading in impossible. So in that sense, trading in (which ultimately hurts games sales) will go away when digital content hits mainstream. IMHO

jazzbrownie's picture
On August 5th jazzbrownie said:

It will be difficult to completely cut stores like GameStop out. They don't profit so much on new products as the sale of used ones. Sixty dollar games are a problem that stores like this help a lot of people to overcome.

talba007's picture
On August 5th talba007 said:

Itunes has already proven that consumers are prepared to have their product in an intangible form. The next hardware cycle could start as soon as 2012. The question is whether the hardware developers will make a concerted effort to cut out retailers such as Gamestop by making fullsize games available through online shopping forums such as Xbox Live. The technology and consumers are already heading in that direction. The question is not if but when will retailers such as Gamestop go the way of Tower Records and Sam Goody.