Player 2 Has Entered the Game: Why GameStop Should Be in Your Portfolio

Source: Thinkstock

Source: Thinkstock

GameStop Corp. (NYSE:GME) is a pretty well-known company, but it is involved in many activities that you may be unfamiliar with. As you probably know, it does primarily operate as a multichannel video game retailer. What you may not know is that it also is a consumer electronics and wireless services retailer. Traditionally, the company sells new and pre-owned video game hardware, physical and digital video game software, pre-owned and value video game products and personal computer (PC) entertainment software in various genres, including sports, action, strategy, adventure/role playing, and simulation. It also offers digital products, including downloadable content, network points cards, prepaid digital and online timecards, and digitally downloadable software. It carries video game accessories, such as controllers, gaming headsets, memory cards, and other add-ons for use with video game hardware and software. It sells strategy guides, magazines, and gaming-related toys.

What is uncommonly known is that it offers mobile and consumer electronics, including new smartphones, tablets, headphones, and accessories, as well as pre-owned smartphones, tablets, and MP3 players. In addition, the company operates kongregate.com, a browser-based game site and Game Informer magazine, a physical and digital video game publication. It also offers iOS and Android mobile applications and an online consumer electronics marketplace available at buymytronics.com. Further, it operates Simply Mac, a certified Apple products reseller and Spring Mobile, an authorized AT&T reseller operating AT&T branded wireless retail stores in the United States. Finally, it offers pre-paid wireless stores under the name Aio Wireless. The stock is just a few points above its 52-week low. Is this an opportunity for a stock trading at only 11 times earnings and offering a 3.6 percent yield?

Well, the company makes good money. In its most recent quarter, total global sales were $2.0 billion, a 7.0 percent increase compared to $1.87 billion in the prior year quarter. Consolidated comparable store sales increased 5.8 percent. Continued strong worldwide consumer demand for Microsoft’s Xbox One and Sony’s PlayStation 4 was the primary driver of the strong sales performance as the new hardware category grew 81.1 percent compared to the prior-year quarter. From launch through April, total market sales in the U.S. of PlayStation 4 and Xbox One hardware have more than doubled the combined sales of PlayStation 3 and Xbox 360 hardware through their first six months of sales. During the quarter, new software sales declined 20.4 percent, due to fewer AAA titles being launched this year compared to the first quarter of 2013.