For investors in GameStop (NYSE:GME), momentum appears to be slowing. Indeed, retail sales of video games are dwindling. And with the recent news that came out yesterday surrounding Netflix (NADSAQ:NFLX) and the move it’s making into offering video games on its streaming platform, one might expect to see some price action in GME and NFLX today.
It’s true, GameStop’s 3% decline today has continued a rather bearish trend since mid-June. Since peaking at more than $300 per share, shares have approximately halved in roughly a month. Since GameStop’s peak, shares are down more than 65%. Therefore, it appears the moves GameStop has been making to digitize its business aren’t happening fast enough.
This move by Netflix into gaming is an intriguing one. After all, investors have been looking for more revenue diversification for a while now. Perhaps this strategic move will pay dividends over time. However, today’s whipsawing price action in NFLX stock suggests investors are still digesting the ultimate impact of the move into gaming.
That said, let’s dive into some of the details of this news and what it means for investors.
Can GameStop Maintain Momentum Amid Challenge from Netflix?
GameStop is a physical retailer of video games that has been shifting toward digitizing its offerings. Indeed, the rise in GME stock in mid-June was mostly attributed to some intriguing news regarding executive additions to the company’s team.
GameStop announced on June 10 that it was bringing on Matt Furlong as the CEO and Mike Recupero as CFO. These two executives left Amazon (NASDAQ:AMZN) to join GameStop and were seen as the ticket to the digital transformation investors were hoping for.
That said, competitive forces remain. And the news that Netflix is stepping into gaming potentially in a big way could spell more trouble for embattled video game retailers like GameStop.
According to Citi analyst Jason Bazinet, “This feels like a significant event with broad ramifications across the video-games landscape.” For investors in GameStop, the question is just how broad the ramifications are. Today, it appears some investors aren’t waiting around to see.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
