Baird Equity Research Report Calls Speculation on Used Games Restrictions ‘Misguided’

A research report on GameStop from equity research firm Baird Equity Research predicts that the games retailer will miss estimates for Q4 earnings. The company is set to release Q4 earnings next Thursday, along with initial guidance for fiscal year 2013. Baird Equity points to weak hardware sales and software prices that are " under pressure." GameStop could see a boost from the next Xbox announcement, the E3 trade show in June and launch of new hardware in the fall, according to the firm.

One interesting note that Baird Equity made was on future consoles restricting the use of used games. They call this speculation on used game restrictions "misguided."

"While both Microsoft and Sony have the capability of restricting used game sales, we believe that competitive forces and consumer preferences will protect the used trade on new platforms," the report notes. "In addition, new consoles will support a variety of digital distribution options and business models; however, we do not anticipate a significant shift to digital downloads of large console games for at least several years."

Finally, the equity firm said that, while the video game sector has been trading high in the early part of 2013, the sector faces some serious challenges:

"The video game sector has traded higher since the beginning of the year, in large part due to anticipation of the upcoming hardware refresh cycle. However, we continue to highlight a challenging year ahead with potential pricing pressure and ongoing consolidation of market share among fewer console game titles. Upcoming catalysts include the next Xbox announcement, the E3 trade show (June), and to a lesser extent, the Game Developers Conference."


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