GameStop Corp. (NYSE:GME) shares jumped as much as 8 percent in trading Tuesday. This after Sony Corporation (NYSE:SNE) (TYO:6758) made its big announcement about the PlayStation 4 and Microsoft revealed more details about its Xbox One.
The 8 percent move for GameStop is its biggest move within a trading day since Aug. 1 of last year. So far this year, the company’s stock has risen 39 percent, reports Bloomberg’s Niamh Ring.
Many famous hedge fund managers engage in philanthropy, often through their own foundations. Leon Cooperman of Omega Advisors founded his foundation with his wife Toby, and he invested the foundation's funds into many hedge funds and other assets. Q3 2021 hedge fund letters, conferences and more Here are Leon Cooperman's favorite hedge funds based on Read More
The Implications Of New Consoles For GameStop
Both of the two new consoles were unveiled earlier this year, although we didn’t learn more details about them until Monday at each company’s conferences. The Xbox One and the PS4 will both be out in time for the holidays, and investors and gamers alike know what that means: big sales are ahead for GameStop Corp. (NYSE:GME).
The game retailer is one of the biggest beneficiaries when new consoles are released, especially when there are two different consoles. Each of those new consoles not only provides competition for the other, but they also have the potential to bring in two sets of customers—one set who favors the Xbox One and another who favors the PS4. Of course which console each of those customers actually walks out of their local GameStop is up for grabs by either of the companies if they can woo gamers away from the competition and over to their side of the store.
GameStop’s Stock Price Reacts
Today’s jump for GameStop shares makes it worth noting that after Microsoft Corporation (NASDAQ:MSFT) announced its Xbox One toward the end of May, shares of GameStop Corp. (NYSE:GME) plummeted, falling as much as 19 percent by the end of the trading week. It seems pretty obvious that investors anyway, like Sony Corporation (NYSE:SNE) (TYO:6758)’s odds at success with its new console better than Microsoft’s.
Piper Jaffray analyst Michael J. Olson doesn’t necessarily see either company beating the other one down completely. He notes that the new PS4 console undercuts Microsoft Corporation (NASDAQ:MSFT)’s Xbox One in price—coming out at $399 compared to the $499 price tag for the Xbox One. This could have an effect on early adoption of the console, meaning that the PlayStation 4 could do better at first. However, Olson believes that “over the life of the consoles the pricing gap will close and multi-yr share will be driven by features and usability.”
The Impact On Used Games At GameStop
Another negative for the Xbox One is the expectation that Microsoft Corporation (NASDAQ:MSFT) might charge a fee for users who want to use pre-owned games on it. This is likely another reason GameStop Corp. (NYSE:GME) shares reacted so negatively to the Xbox one news and so positively to the PS4 news. Sony Corporation (NYSE:SNE) (TYO:6758) doesn’t intend on charging fees for used games, which made up about 31 percent of GameStop’s first-quarter revenue.
Olson believes that both Sony and Microsoft will sell about 75 percent as many of their next generation consoles as they do of their current generation models over the next couple of years. Olson maintains his overweight rating and $43 per share price target for GameStop on the heels of Monday’s two major console announcements.