Janney Capital Defends GameStop (GME) on Used Game Block Speculation

January 3, 2013 12:11 PM EST
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Price: $22.73 --0%

Rating Summary:
    12 Buy, 10 Hold, 3 Sell

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Intra-day, Janney Capital analyst Tony Wible defended GameStop (NYSE: GME) following speculation that Sony will block used games in the PS4. The analyst notes this speculation surfaced in 2005 prior to the launch of the PS3. Shares were crushed at the time but turned out to be a great buying opportunity as the technology never showed up, he notes.

Wible reiterated his Buy rating and raised his price target of $32.00 (from $27.00).

"We recommend GME based on: 1) its peak market share position at the onset of a next gen game cycle; 2) new sources of high margin revenue from iDevice trades and digital initiatives that reposition GME in the evolving landscape; and 3) the move towards usage-based billing of Internet data. Furthermore, the company will benefit from easing comps, a strong balance sheet, large dividend payments, and share repurchases. We believe low expectations and a high short interest create a positive risk/reward, and that investors able to buy/hold the stock through holiday 2013 will be rewarded. We are increasing our 2013 and 2014 estimates as well as our target P/E multiple to 8.5x (from 7.75x) on increased confidence in the game cycle. As a result our Fair Value increases to $32 (from $27)."

For an analyst ratings summary and ratings history on GameStop click here. For more ratings news on GameStop click here.

Shares of GameStop closed at $25.66 yesterday.

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