iPhone 5: Sink or Swim Time for GameStop

Investors are spending a lot of time obsessing over what the iPhone 5 means for Apple (AAPL), Google (GOOG) and the like. But it’s also a big test for GameStop (GME).

GameStop, once a gamers’ destination, is in the process of transforming its storefronts into Apple resale stores. That’s a strategy that investors seem to like and has turned around its declining stock.

GME Chart

GME data by YCharts

The iPhone 5 represents the first major test of the strategy, as it has helped flood the market with older iPhones. Type “used iphones” into Google, and GameStop is the third option to come up. Its link takes searchers to a page featuring refurbished Apple products including best sellers like a $120 iPhone 3G 8GB, a $140 iPhone 3G 16GB, and a $300 iPhone 4 16GB. The site also offers a free iPhone 5 case to people who trade in old iPhones, iPods or iPads, while supplies last.

GameStop has some strong competitors, many with eBay (EBAY) stores. They include Gazelle, which has earned high marks from customers trading in products. Its eBay store recently sold an iPhone 3G 8GB for $93 and offered another for $122. PCMag ran an article with a list of options.

Meanwhile another outfit called EcoATM, which received an investment from Coinstar (CSTR), is installing automated kiosks that will buy used electronics for cash.

In its most recent quarterly filing, for the quarter ended in July, revenues fell to $1.55 billion, down from $1.74 billion a year earlier. Its revenue growth is negative.

GME Revenue Growth Chart

GME Revenue Growth data by YCharts

GameStop’s earnings now trade for 58% of Apple’s earnings.

GME PE Ratio Chart

GME PE Ratio data by YCharts

From the editors of YCharts.YCharts Pro Investor Service includes professional stock charts, stock ratings and portfolio strategies.

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