The analyst says that the specialty retailer is poised to generate over $2 billion of revenue in used game, hardware and accessories in fiscal 2009, which began in February. GameStop's gross margin on used games is around 50 percent.
The shifting software-hardware mix will only improve GameStop's prospects. As the console cycle moves forward and installed bases grow, consumers are buying more of the high-margin software and pre-owned products, as opposed to the low-margin new hardware, Sebastian said.
Ahead of overall industry retail data from NPD Group, due Thursday, Sebastian said he expects sales to be up "slightly" on a tough comp.
The analyst also stated that he expects Amazon.com's recent entry into the used game trade-in business to have little appeal to core GameStop shoppers. GameStop CEO Dan DeMatteo recently told Edge that Amazon's used games business is doomed to failure.
GameStop expects to report $8.8 billion in sales for fiscal 2008. The company will report official earnings on March 26.
Shares in the retailer were down 42 cents, or 1.68 percent, to $24.53 in late morning trading.