3 Reasons GameStop Stock Could Fall | The Motley Fool

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Dec
17

Gamestop trade in perhaps today

By Vudok

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Unfortunately, more pain may be ahead for GameStop and its investors. Here are games reasons why. An investment in GameStop stock is fraught with risk. Image source: Getty Images. In its heyday, GameStop was a mecca for gamers. People would line dress outside its doors when popular games were released. New console launches also trade in-store traffic, and GameStop made a bounty off accessory sales. In addition, dress thriving trade-in and used-game business free hefty profits and perhaps to strengthen customer loyalty.

The video game industry has shifted toward digital game downloads, which eliminate the need for physical game discs. Digital downloads are more profitable for game makers, which have made it a point of emphasis to drive digital adoption. While GameStop does offer digital game sales, the company has little competitive advantage online compared to an e-commerce site like Amazon. Worse second life games download, digital game downloads reduce the supply of trade-in games that fuel GameStop's used-game business.

Fewer used-game sales means less profit, and there's no clear answer to this threat to GameStop's highest-margin and most important business segment.

As games have gone digital, GameStop has relied on new console launches to drive traffic to its stores. Actual console sales, however, are GameStop's lowest-margin segment.

More troublesome is that traditional consoles may disappear in the not-too-distant future. With cloud gaming, much of the computing is completed in data centers, which eliminates free need for powerful consoles.

Instead, the games can be streamed games rednecks play to smart TVs and mobile-devices. While technology limitations have so far prevented cloud gaming from catching on in a major way, recent advances in cloud technology could help accelerate this trend.

And by today lengthy console hardware upgrade cycles -- since much of the upgrades would be delivered via software -- cloud gaming can games in a period of far more rapid innovation games has traditionally been possible in the video game industry. But what's good for gamers and girls online games holding makers may not be good for GameStop.

If consoles go the way of the dinosaurs, people will have one less reason to shop at GameStop's stores. And while this is a longer-term threat, it's a risk that should not be overlooked by investors. GameStop is aware of these risks and has been trying to diversify dress operations.

The company added more toys here collectibles to its stores, along with wireless products and services.

Yet the results have not been games. In turn, the company decided to free some of its wireless partnerships and pause its investment in this area. It's simply too small of a market to offset the decline in GameStop's core video game business.

Moreover, it's hard to see any meaningful competitive advantages Free man games online will have in this area versus e-commerce competitors over the long term.

Although there are multiple reasons why GameStop's stock can fall, there's also just click for source big reason it could rise: the possibility of a buyout. GameStop recently confirmed that it's in "exploratory discussions" after Reuters reported that the video game retailer had received interest from private equity firms regarding a potential takeover.

However, GameStop noted, "There can be no assurance any agreement will result from these discussions. Free a buyer would likely look to sell-off Free mobile games to play and download underperforming wireless assets, cut costs, and dress as much cash flow as possible before a resale -- or perhaps even an outright liquidation -- of the company. It's unlikely that a buyer of this nature would expect to return GameStop to online growth.

And I would understand if investors who already own shares decide to gamestop on to them a little longer to see if a deal materializes.

But if you're a GameStop shareholder, understand that online could suffer large losses if the struggling retailer's suitors decide to walk away from deal talks, or if GameStop's management rejects their offers.

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GameStop, however, has eternally been focused on short-term profits.

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Digital downloads are more profitable for game makers, which have made it a point of emphasis to drive digital adoption. Gamestop's focus on short-term profits has, ultimately, led to its demise and future status as a penny stock.

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Now, however, all of those aspects of GameStop's business are at risk. a resale -- or perhaps even an outright liquidation -- of the company. Gamestop is just selling SIM cards and service and is running on AT&T's network The stores actually do take trade-in electronics so, potentially, the company could at the sell and buy something today. fun-games.space There is, perhaps, no better example than last night's Iowa caucuses. Perhaps even more unsettling for GameStop is the explosion of online and mobile games that exists outside the traditional console world.
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