GameStop stock falls following Amazons pre-owned news

The news that

online retail giant Amazon is to enter the pre-owned games market

has seen the shares of High Street rival GameStop take a steep fall, dipping 14 per cent yesterday.

Variety reports that used games account for 44 per cent of GameStop’s profits, and that Amazon’s move into the sector has concerned the financial markets.

However, UBS analyst Ben Schachter believes the market is over-reacting: Online game sales currently comprise less than 2 per cent of GameStop’s stock total business and we estimate significantly less than 10 per cent of industry game sales.

We believe the ‘instant gratification’ of the trade-in process at physical stores remains a key advantage for GameStop, and we note that GameStop once offered online/mail-in trade-ins but stopped after issues with product quality/shipping expenses.

The bottom line is that Amazon is a formidable competitor, but we don’t see any meaningful near-term risk, and online used just isn’t a particularly big market.”

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