Tuesday, April 1, 2008

gme's on fire

i think gme is still in the early stages of its growth cycle. the company has posted a huge average surprise of 33.2% over the past four quarters. just over the past week, this year's earnings estimates have jumped 17 cents to $2.37 per share.

gme sells software, hardware, and game accessories for video game systems and personal computers. the company is also the largest reseller of used video games. it currently operates 5,264 retail stores across north america and europe. gme makes its stores easily accessible to clients of all age groups by locating its stores within walking or biking distance, focusing on high-traffic areas.

most of its stores are located in strip malls, with the remaining stores located in shopping malls. gme also offers strategy guides, action figures, as well as other computer and video game magazines to its customers.

i think gme will continue to benefit from the current video game cycle, which is still in the "early innings" of the game. especially exciting is the new release of "grand theft auto," which may in part be driving the stock's advance. the company is well-positioned to take advantage of this video game cycle that is being driven by next-generation video game consoles and the best video games ever designed. gme's stellar fourth quarter results were driven by new video games including activision's call of duty 4 and guitar hero 3, rock band from erts assassin's creed by ubisoft and nintendo's super mario galaxy.

one of the great things about gme is that it doesn't matter who the winners or losers are in terms of consoles or video game titles, as long as demand for games is strong. instead of picking the winners, gme closely monitors the pulse of the video game world and lets its customers tell them which games to stock in stores.

in addition to the next generation video game cycle, gme's store expansion strategy continues to drive sales. gme is aggressively opening new stores in favored strip mall locations. these stores offer superior customer service and focus on trade-ins and used game sales. gme's size affords the company many competitive advantages and cost savings that should help drive solid sales growth and profit margin expansion in the years ahead.

disclosure: long gme

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