GameStop (GME) was down to its last quarter in mid-2012 as the threat of digital downloads threatened to destroy its brick-and-mortar video game business. There were rumblings that the big video game companies would start cracking down on used games — a big part of GameStop’s business — and pressures as games migrated to mobile devices was huge.
But then relief swept in this year as the next generation of gaming consoles — including the PlayStation 4 and the Xbox One — decided to pass on safeguards that would prohibit used titles.
That news, followed by better-than-expected earnings even amid the negativity and a capitulation from short sellers, has helped lift GME stock to new multiyear highs lately and has helped it challenge pre-recession highs.
Of course, investors shouldn’t forget that the pressures from downloadable content still remain and that GameStop’s brick-and-mortar model remains threatened going forward.