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Goldman Sachs Analyst Believes Industry Growth Has Peaked

by Carmine Red - April 24, 2008, 2:20 pm EDT
Total comments: 7 Source: MarketWatch

Despite record March sales, a Goldman Sachs analyst believes that a dearth of big releases for the rest of the year will result in slower growth through 2009.

According to Goldman Sachs analyst Robert Higginbotham, last March's excellent sales figures could be mark a turning point in the game industry's momentum.

"Industry growth remains on a path toward deceleration from its current peak," predicted Higginbotham, downgrading the stock of game retailer GameStop to a sell rating. GameStop stock has become popular because it's a way for investors to bet on the industry while not having to predict whether any one publisher or game will meet with success. But using his prediction for a future industry downturn, Higginbotham maintained a $50 price target for the shares, which are currently hovering around the $55 mark.

Although acknowledging that soon-to-release blockbusters like GTA IV and Wii Fit are likely to sell very well, Higginbotham pointed out his belief that "the remainder of the year lacks any big releases, and comparisons get tougher throughout the year as we lap titles such as Halo 3 and Guitar Hero 3."

This goes against popular opinion, which sees the industry as continuing to outperform itself just as it did last March, and in the face of an economic downturn. Said analyst Arvind Bhatia of Sterne Agee: "It increasingly appears the current video-game cycle could be longer and stronger than the most recent one."

But Higginbotham believes that his current valuation of GameStop stock already takes some level of growth into account. Even if the industry and GameStop hold their ground for 2008, Higginbotham believes they could still be in for a drop: "Even in this strong upside case, 2009 growth will still decelerate."

Talkback

animecyberratApril 24, 2008

I thought we were boycotting Gamestop, how can their sales and stock keep climbing if we're boycotting them. Fess up you culprits.

Slower growth through 2009? How could this be with with Monopoly, Wii Fit, and Build-a-Bear on the horizon?

Ian SaneApril 24, 2008

There's no big games to come out later this year!!  Nevermind that it's only April and most videogames are announced in May!  We're all SCREWED!!

Maybe in September this kind of analysis would have some credibility but not now (and even then analysts know dick about videogames).  This is like predicting how a team will do next season before the current season is even over.  WE ONLY HAVE THREE PLAYERS SIGNED AND THE SEASON OPENER IS ONLY FOUR MONTHS AWAY!!  OH F*CK!!!!

ShyGuyApril 24, 2008

Hee hee, Higginbotham.

Michael8983April 24, 2008

A Wii Sports (or even Wii Play) sequel could change the outlook for the rest of the year. Who knows, Nintendo might even have a Zelda or Mario Galaxy sequel to reveal at E3. Or a new Nintendogs which could end up being one of the biggest Wii successes yet.

that Baby guyApril 24, 2008

Who cares what he's got to say.  Anyone have their prediction history on hand?

mastroApril 24, 2008

Does anyone else think this is premature?

There are more consoles out in the wild than ever before for this generation, before all the late year announcements, before possible price drops(Xbox 360), before huge game releases that we know are coming out(MGS 4, GTA 4, some others).

I really don't understand these guys

Last but not least;
Game stop/Eb games sucks

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