As the author of this article pointed out on Gamestop, same store sales have recently started declining. Management attributes this to weak software release schedule, which is understandable. However, I would be watching for any further signs of sales erosion as we know from ATVI and ERTS (#1 and #2 in the gaming industry) that digital sales are increasing YoY.
ATVI highlights in their last earnings report in August "For Six-Month Period Net Revenues from Digital Channels Grow More Than
20% Year Over Year"
ERTS reported this week and digital sales are also growing strongly "On a trailing twelve months
non-GAAP basis, digital revenue was $904 million, up 37% year-over-year.
In the same period, non-GAAP revenue for downloadable and
free-to-play content was $335 million, up 74% year-over-year. On
consoles, trailing twelve month non-GAAP digital revenue was $278
million, up 99% year-over-year."
The second thing I noticed is that all of the replies to the article on Seeking Alpha are bullish. If everyone has bought, who else is left to buy?
I started looking around for other GME articles and found a recent presentation from Jim Chanos at the Value Investing Congress. His full presentation can be seen here at Market Folly.
As Chanos points out, with all of the digital growth in the video game business, this growth will pressure the highest margin business at GME, used game sales.
No position currently in GME but may initiate a short position.
No comments:
Post a Comment