GameStop (GME): Amazon's Twitch Announcement To Have Little Impact - Baird
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Baird analyst, Colin Sebastian, reiterated his Outperform rating on shares of GameStop (NYSE: GME) along with a price target of $40 after Amazon (NASDAQ: AMZN) announced "Twitch Prime," an extension of Prime membership with enticements for the gamer market.
New Twitch Prime members (as well as current Amazon Prime members) will have access to digital downloads and in-game loot from popular Twitch games (skins, new characters, etc.), and access to Twitch's monthly streaming service (plus one premium channel). Prime members will also continue to receive exclusive discounts on newly-released games, in addition to free release-day delivery on pre-ordered titles. This move should help Amazon increase its share within the broader gamer market and also seeks to increase Prime adoption into younger audiences.
Amazon has disrupted many retail business models but GameStop has increased its US hardware + software market share over the last five years (~25% in FY10 vs. ~35% in FY15). The analyst believes the company's "PowerUp" rewards program (46M members globally, 1 in 5 US households) and buy/sell/trade model create a defensible competitive moat for GameStop. He expects modest, if any, impact from Amazon's new initiative for Gamestop but Walmart and BestBuy may lose more category share.
Shares of GameStop closed at $27.59 yesterday.
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