Aug. 22 - Before the Sony PlayStation 4 and Microsoft xBox One gaming consoles are even out, an anticipated surge in sales tied to their release is lifting GameStop forecasts and stock price. Bobbi Rebell reports.
GameStop out with a big win- before the official game has even started. Advance orders for new consoles driving it to raise its earnings forecast. The video game retailer is counting on new game systems from Microsoft and Sony to boost spending for the holiday season and for video games. The stock shot up on the news- adding to a healthy run up. And Piper Jaffray's Michael Olson says there's more room to go: SOUNDBITE: MICHAEL OLSON, SENIOR RESEARCH ANALYST, PIPER JAFFRAY (ENGLISH) SAYING: "There should be some volatility around the launch related to that, as some investors get themselves out of the stock as the consoles actually launch. But in the last cycle we did see GameStop shares appreciate by over a 100% in the twelve months after the console so there still should be room to go." Part of the stock surge has been short covering- as people doubted GameStop could hold its own against the surge in mobile gaming. The sector has been on a downward trend- total U.S. sales of video game hardware and software fell 19 percent in July- according to market research firm NPD. They also aren't the only retailers who sell video games. But GameStop appeals to hardcore gamers- who want to go in and talk to a store clerk- or bring back a game they didn't like, sell it used, and buy something else. And now that a new generation of consoles is coming out- that loyalty has paid off: SOUNDBITE: MICHAEL OLSON, SENIOR RESEARCH ANALYST, PIPER JAFFRAY (ENGLISH) SAYING: "We're going to see GameStop getting something like 20% to 25% market share. Whereas in the last console cycle they probably only had about 15% market share. So the console makers are acting accordingly and they are giving GameStop a higher allocation of consoles in this first run and inventory." It will also benefit from new releases, like the latest Grand Theft Auto- that are expected to be huge sellers.