Microsoft (MSFT) Reversal on XBox One Policy a 'Major Positive' for GameStop (GME) - Needham & Company

June 20, 2013 9:15 AM EDT
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Price: $23.34 +2.68%

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    12 Buy, 10 Hold, 3 Sell

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    Up: 35 | Down: 31 | New: 11
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Shares of GameStop (NYSE: GME) are indicated to open 4.6 percent higher Thursday after Microsoft (NASDAQ: MSFT) did an about face on its XBox One DRM policy, scrapping plans for an always-on internet connection and allowing the consoles to play used/borrowed games.

Needham & Company analyst Sean McGowan weighed in on the move, calling it a "major positive" for GME.

"We see the move as a reaction to severely negative consumer reaction, and to the fact that Sony, its main video game console rival, had announced at E-3 that it would not require an internet connection or place restrictions on used games," McGowan said. "This move is clearly a major positive for GME, because it increases the appeal of XBO, and ensures that at least for the near- to mid-term, GME’s used business won’t be disrupted by console makers' DRM policies. Longer term, we continue to see significant potential for challenges to GME's used business, as discussed herein (and in prior publications). We see few negative near-term catalysts to send GME shares lower, but believe the stock's strong increase in the last year reflects most of the upside to be expected from the new console launches."

Despite the Microsoft news, the firm maintained Hold rating on GME shares.

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 $38.53 yesterday.

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