Wal-Mart And GameStop

Wal-Mart And GameStop

Did you ever wonder what you should do with your old videogame copy of Aliens vs. Predator: Extinction or Blade II? Well, now Wal-Mart is giving customers the opportunity to exchange old videogames for credit in one of their chains or Sam’s Club stores. Wal-Mart Stores, Inc. (NYSE:WMT) will then refurbish each used videogame, turning it around, and selling it in “like –new condition”. This idea has videogame retailer GameStop Corp. (NYSE:GME) a bit nervous about the increased competition. This news has some analysts downgrading the stock, recommending HOLD GME as the company adjusts its business plans to account for Wal-Mart’s presence. On the other hand, other analysts are confident in GME and maintaining their BUY rating.

S&P Capital analyst Efraim Levy downgraded the stock in light of the news, noting that the company will have to make some adjustments in order to stay competitive. After hearing the news, Efraim observed that, “GameStop is already adjusting to increasing its focus on sales of digital content and for mobile devices.”  Efraim has a -0.7% average return over S&P-500 and a 42% success rate of recommended stocks.

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On the other hand, SunTrust analyst David Magee has reiterated his BUY rating with a $60 price target, despite Wal-Mart Stores, Inc. (NYSE:WMT)’s attempt to grab a piece of the market. David noted that he “does not think this move by Wal-Mart will threaten GameStop Corp. (NYSE:GME) unless they were to become ‘particularly aggressive’ with both pricing and advertising.” David added that, “GameStop’s ‘more efficient’ distribution channels,” might lead Wal-Mart to actually sell their used games to GameStop. David has a +12.2% average return over S&P-500 and a 67% success rate of recommended stocks.

David has already seen success in the videogame business with his recommendation to BUY Best Buy Co., Inc. (NYSE:BBY) in June of 2013. David argued that “external factors may be aligning for Best Buy, including an improving housing market that he said should boost TV demand.” This recommendation earned David +35.5% over S&P-500.

Wal-Mart Stores, Inc. (NYSE:WMT) might be trying to grab a piece of the videogame action, but not all analysts are convinced that veteran videogame company GameStop Corp. (NYSE:GME) will suffer because of their presence. Before you make a decision about your involvement in GME financially, be sure to review each analyst’s past recommendation history by downloading TipRanks. With TipRanks you will have the information you need to know who to trust.

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