GameStop’s decline in share price may or may not be related to Xbox One

By Stephany Nunneley
24 May 2013 21:09 GMT

Share in GameStop have been up and down most of the week, with many attributing the decline in share price to Microsoft’s rather unclear stance on used game sales.

Looking over NASDAQ, shares are currently down to $31.96, which is a $4.05 drop – or 11.25%- over the price at closing, $36.01, yesterday.

Shares in GME were trading at $35.42 this morning when Wall Street opened, and at one point fell to $30.94 per share.

While it’s normal for shares to fluctuate during the day, part of the decline could have to do with GameStop reporting its quarterly results for the period ending May 4 on Tuesday.

The firm posted a 6.8% year-over-year decline in revenues to $1.87 billion, with profits down 25% year-over-year to $54.6 million.

At the close on Monday, stock was trading at $39.71 and after the Xbox One announcement on Tuesday, share prices at close were at $36.76.

Wednesday, shares were at $36.09 at the opening bell, and Thursday morning after the firm’s results were released after Wednesday’s closing bell, share prices opened at $35.05.

So, it’s not as bad as it would seem, but if you have stock in the firm it’s worth keeping an eye on.

It’s hard to know exactly the cause of share prices going up or down – unless the news is obvious. Especially since one slight rumor can cause stock holders to freak out and either dump everything they own or start buying in bulk.

During a call to investors after the financials were released, GameStop president Tony Bartel said Microsoft had said it would support used games at retail, and that more on it wouldbe revealed at a later date.

“We are working with both Microsoft and Sony to make these consoles most affordable, and we are working very closely with not only the platform holders, but all of the publishers as well to make sure that there is a seamless transfer to the next generation.

“Xbox has said that they do support the trade and resale games at retail and that they want to handle communications from this point forward on that. I think what is important to note is that all three of the platforms that have launched, all three of the consoles that launched have now come back and they say: ‘I realize the value of the buy-sell-trade model,’ and they have built that into their new consoles moving forward.

“So we anticipate that we are going to be able to leverage that like we leverage it on the consoles today to make not only those consoles, but the new games, the new deals, see all these other ancillary products that we sell, more affordable by running the buy-sell-trade model in the future.

“But other than that, Microsoft’s done its communication.”

Furthermore, J. Paul Raines, the firm’s CEO and director said that while currently there’s a “tight communications process,” GameStop has the ability to bring $1 billion of trade credits into the fold, which would net console manufacturers and publishers quite a bit of money

“Clearly, platform holders understand the value of that $1 billion-plus worth of trade credits, and they’ve enabled that in all three of the new platforms that launched,” added Robert A. Lloyd CFO and EVP.

Add-in Micorosft spokesman Major Nelson’s comments on the matter, and you have this statement from Microsoft:

“The ability to trade in and resell games is important to gamers and to Xbox. Xbox One is designed to support the trade in and resale of games. Reports about our policies for trade in and resale are inaccurate and incomplete. We will disclose more information in the near future.”

So gamers and day traders alike will just have hold out for more information at E3. It’s three weeks away.

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