Thursday, May 23, 2013

GameStop Has 2,500 Days to Live or Die

GameStop has recently benefited from the announcement that the Xbox1 and PS4 PlayStations will support GameStop game cells. This gives GameStop time to not only generate easy revenues from its game cells but also to figure out what to do with itself after the Internet likely replaces game cells as a source of video games.

The current life expectancy of GameStop's game cells is around seven years, or 2,500 days, so if it looks ahead to the challenge of marketing Internet downloads, long-term prospects are good. If GameStop rests on its laurels or old business model, it could be in for a rude shock.

Right now, the company produces $500 million in free cash flow or a 10% cash flow relative to its market cap, the business is cheap, and there's a 33% short position on the company that could turn into a short squeeze if this Christmas brings a successful launch of its new products.

For the next three years, GameStop looks good. Beyond that, it depends on how the company adapts to the changes in the market. 

What does the future of gaming mean for Microsoft?
It's been a frustrating path for Microsoft investors, who've watched the company fail to capitalize on the incredible growth in mobile over the past decade. However, with the release of its own tablet, along with the widely anticipated Windows 8 operating system, the company is looking to make a splash in this booming market. In a new premium report on Microsoft, a Motley Fool analyst explains that while the opportunity is huge, so are the challenges. The report includes regular updates as key events occur, so make sure to claim a copy of this report now by clicking here.

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More Expert Advice from The Motley Fool
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