GameStop to benefit a lot from PS4/Xbox 720 launch this year

GameStop will post record profits according to analysts at Wedbush Morgan.

Michael Pachter has revealed in an investor note that he expects the company to do really well as a product refresh from two major companies will result in a lot of sales.

He also talked about how used games will boost their business significantly as people will be trading their old games and hardware for new ones.

“We have high hopes that the PS4 and next Xbox launches will renew investor interest in the publishers. The biggest gains, however, may be seen by GameStop,” the investor note read.

“We expect Microsoft to announce its console in the next few months, and at the latest at the E3 Expo in mid-June. Although we think that Microsoft aspires to position the next Xbox as the entertainment hub in the living room, suggesting a possible launch delay, we think that the company is intent upon gaining further market share next cycle. As such, we think that the company intends to launch alongside the PS4, and we expect gamers to have two next-generation consoles to choose from this fall.

He also believes that the new consoles will not block used games and also said that gamers will favor the console that doesn’t go this route.

“The biggest beneficiary of all this is GameStop. The company thrives in a product refresh cycle, and its used business typically spikes, as many gamers trade in old systems and software to generate currency so that they can buy new systems. There has been some speculation that the PS4 and the next Xbox will block used games, but Sony’s studio head, Shuhei Yoshida, stated firmly that the PS4 will not block used games. We think that Microsoft would be foolhardy to do so if Sony does not, as we believe that gamers will favor the console that provides them the greatest number of options; in our view, should one manufacturer block used games and the other doesn’t, the latter manufacturer would most likely gain more than 20 percent market share. Accordingly, we do not expect either console to block used games, and we expect GameStop shares to rally for the balance of the year.”