{"id":104647,"date":"2017-04-11T10:57:54","date_gmt":"2017-04-11T14:57:54","guid":{"rendered":"http:\/\/countingpips.com\/?p=104647"},"modified":"2017-04-11T06:58:43","modified_gmt":"2017-04-11T10:58:43","slug":"gamestops-earnings-the-end-of-the-video-game-boom","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2017\/04\/gamestops-earnings-the-end-of-the-video-game-boom\/","title":{"rendered":"GameStop\u2019s Earnings: The End of the Video Game Boom?"},"content":{"rendered":"<div id=\"inves-4275278105\" class=\"inves-below-title-posts inves-entity-placement\"><div id =\"posts_date_custom\"><div align=\"left\">April 11, 2017<\/div><hr style=\"border: none; border-bottom: 3px solid black;\">\r\n<\/div><\/div><p>By <a href=\"http:\/\/WallStreetDaily.com\/\"><u>WallStreetDaily.com<\/u><\/a><\/p>\n<p><img decoding=\"async\" style=\"float: left; max-width: 85px;\" src=\"https:\/\/duip7hn7nchpo.cloudfront.net\/editor-circle-louis-basenese.jpg\" alt=\"Louis Basenese\" \/>Investing is easy when you\u2019re riding a hot industry.<\/p>\n<p>Heck, when every stock within a certain industry is going vertical \u2014 who could ever lose?<\/p>\n<p>One such sector is the video game industry.<\/p>\n<p>Notice the chart of the PureFunds Video Game Tech ETF (GAMR) below.<\/p>\n<p>&nbsp;<\/p>\n<p class=\"centered\"><img decoding=\"async\" class=\"centered aligncenter\" src=\"https:\/\/s3.amazonaws.com\/wallstreetdailywebsite\/wp-content\/uploads\/2017\/04\/videogame_chart.png\" alt=\"Byron at Landing Side\" \/><\/p>\n<p>The fund has virtually doubled the returns of the S&amp;P 500 over the last 12 months.<\/p><div id=\"inves-260440037\" class=\"inves-in-content inves-entity-placement\"><hr style=\"border: 1px solid #ddd;\">\r\n<div id=\"inpost_ads_header\">\r\n<p style=\"font-size:10px; float:left; color:#666;\">Free Reports:<\/p><\/div>\r\n<div id=\"inpost_ads\"> \r\n<p style=\"font-size:15px; float:left;\"><a href=\"https:\/\/goo.gl\/1ApBOV\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/investmacro.com\/wp-content\/uploads\/2018\/06\/graph_techs_PD.png\" align=\"left\" width=\"80\"  height=\"55\"\/><\/a>\r\n\t     <a href=\"https:\/\/goo.gl\/1ApBOV\"><b><u>Get Our Free Metatrader 4 Indicators<\/u><\/b><\/a> - Put Our Free MetaTrader 4 Custom Indicators on your charts when you join our Weekly Newsletter<\/p><br><br>\r\n<br>\r\n<br>\r\n<p style=\"font-size:15px; float:left;\"><a href=\"https:\/\/goo.gl\/f3RrHX\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/investmacro.com\/wp-content\/uploads\/2019\/01\/cot_pie_80.png\" align=\"left\" width=\"80\"  height=\"55\"\/><\/a>\r\n\t    <a href=\"https:\/\/goo.gl\/f3RrHX\"><b><u>Get our Weekly Commitment of Traders Reports<\/u><\/b><\/a> - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.<\/p><br><br>\r\n<\/div>\r\n<hr style=\"border: 1px solid #ddd;\">\r\n<br><\/div>\n<p>But on the heels of a bad earnings report, \u201cexperts\u201d now believe that GameStop (GME) just rained on the video game parade.<\/p>\n<p>GameStop\u2019s shares are being bludgeoned accordingly.<\/p>\n<p>I asked my senior analyst, Martin Hutchinson, to get us the scoop.<\/p>\n<p>The question I posed to Hutch is simple\u2026<\/p>\n<p>Is GameStop\u2019s fall from grace a warning that the video game rally is over\u2026 or is GameStop simply on the wrong end (the retail end) of the profits?<a name=\"video\"><\/a><\/p>\n<p>Hutch\u2019s full analysis is below.<\/p>\n<p>Ahead of the tape,<\/p>\n<p>Louis Basenese<br \/>\nChief Investment Strategist, <i>Wall Street Daily<\/i><\/p>\n<hr \/>\n<p><script src=\"https:\/\/fast.wistia.com\/assets\/external\/E-v1.js\" async><\/script><\/p>\n<div class=\"wistia_responsive_padding\" style=\"padding: 56.88% 0 0 0; position: relative;\">\n<div class=\"wistia_responsive_wrapper\" style=\"height: 100%; left: 0; position: absolute; top: 0; width: 100%;\">\n<div class=\"wistia_embed wistia_async_bzpc30h2i0 videoFoam=true\" style=\"height: 100%; width: 100%;\"><\/div>\n<\/div>\n<\/div>\n<hr \/>\n<p><strong>Question:<\/strong> Martin, video game retailer GameStop has been beaten up lately. And the experts \u2014 and I use that term loosely \u2014 believe the company is falling victim to the online sales boom. Where do you stand on all of this?<\/p>\n<p><strong>Martin Hutchinson:<\/strong> It\u2019s interesting. Jim Cramer says that GameStop is history and that video games in general are dying. But I\u2019m not sure I buy that. We\u2019ve talked about retailers in the last few weeks, and that brick-and-mortar retailers do have a problem with the online sales.<\/p>\n<p>And that\u2019s certainly a problem in video games, where the brick-and-mortar retailers are losing market share to digital downloads. But it\u2019s a little bit like some of the other retailers that I think aren\u2019t going to disappear altogether. Because game buyers, many of whom are teenage males, like to check out games before they buy them. You want to see what the thing feels like before you put out $50 to buy the thing.<\/p>\n<p>Also, the video game stores have been an area where they socialize. GameStop has cut down the number of game tournaments, for example. And that\u2019s been foolish of them, because local game tournaments are very much the best way to sell games. Buyers all turn up for these things, particularly in the fighting games area. If you hold a good local game tournament, you\u2019re going to sell an awful lot of product.<\/p>\n<p>The other problem with GameStop is that it\u2019s become tied to consoles. But most new games are PC games or games on handhelds. Although you can\u2019t play a good game on a handheld. Certainly, the real core gamers don\u2019t do their gaming on a handheld much.<\/p>\n<p>In the video games area as a whole, consoles have been losing market share because the new generation of consoles are too difficult to design games for. And the chips have gotten so complicated you\u2019d have to pay $1,500 to buy a console with the latest generation of chips. You can\u2019t sell video game consoles usefully at a $1,500 price point.<\/p>\n<p><strong>Question: <\/strong>Let\u2019s take a little bit of a longer outlook on this, Hutch. What do you see next in the industry?<\/p>\n<p><strong>Martin Hutchinson:<\/strong> I think the U.S. video game business is splitting between very large companies and teams, which have 100 people on each new game. And they tend to lack imagination in finding new titles.<\/p>\n<p>And then you\u2019ve got a bunch of one-man shops, which can\u2019t get the quality, because it takes more than one person to design a modern video game. So a lot of the business is moving to Europe.<\/p>\n<p>Finland and Poland in particular have become nexuses of video game developers. Because in order to develop a video game business, you need a lot of developers in one place synergizing off each other. And that\u2019s what Finland and Poland have got.<\/p>\n<p>They use medium-sized teams of 10\u201330 developers on each game, and that tends to produce the best game.<\/p>\n<p>There\u2019s a Polish company in particular called CD Projekt Red, which is the leading Polish developer, $200 million in sales. But it\u2019s not quoted in the United States, so Americans can\u2019t buy it.<\/p>\n<p><strong>Question:<\/strong> That\u2019s a bummer. So at the end of the day, Hutch, is Cramer right to bail on GameStop?<\/p>\n<p><strong>Martin Hutchinson:<\/strong> I had a look at its latest results, and I\u2019m not sure he is. They\u2019re moving into collectables, which are things related to the big film series. And that\u2019s giving them another way to get customers into the shops.<\/p>\n<p>They\u2019re now 37% digital sales rather than physical boxes. And they\u2019re going into game development in a small way themselves, which is probably a good idea because they\u2019ve got all these people who understand them.<\/p>\n<p>Their 2016 earnings per share were $3.40, and they\u2019re only selling at about $21. They increased their quarterly dividend to $0.38 on March 1, from $0.36. So currently they have a 7% yield, and based on 2017 earnings, which are expected to be a minimum of $3.10, about a 7 times price-earnings ratio.<\/p>\n<p>The company has $669 million in cash. So a 7% yield, 7 times price-earnings and $600-plus million in cash. I have to say, to me, that is something of a buy signal.<\/p>\n<p>Although I wouldn\u2019t be absolutely hellbent on that, it certainly looks quite attractive.<\/p>\n<p><strong>Question:<\/strong> Good stuff, Hutch. Thanks again for your time.<\/p>\n<p><strong>Martin Hutchinson:<\/strong> Great to be with you.<\/p>\n<p><strong>Question:<\/strong> This is Wall Street Daily signing off.<\/p>\n<p>Good Investing,<\/p>\n<p>Martin Hutchinson<br \/>\nSenior Analyst, <i>Wall Street Daily<\/i><\/p>\n<p>The post <a href=\"https:\/\/www.wallstreetdaily.com\/2017\/04\/11\/gamestops-earnings-end-video-game-boom\/\" rel=\"nofollow\">GameStop\u2019s Earnings: The End of the Video Game Boom?<\/a> appeared first on <a href=\"https:\/\/www.wallstreetdaily.com\" rel=\"nofollow\">Wall Street Daily<\/a>.<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>By WallStreetDaily.com Investing is easy when you\u2019re riding a hot industry. Heck, when every stock within a certain industry is going vertical \u2014 who could ever lose? One such sector is the video game industry. Notice the chart of the PureFunds Video Game Tech ETF (GAMR) below. &nbsp; The fund has virtually doubled the returns [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-104647","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/104647","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=104647"}],"version-history":[{"count":2,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/104647\/revisions"}],"predecessor-version":[{"id":104657,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/104647\/revisions\/104657"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=104647"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=104647"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=104647"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}