Why GameStop Will Rebound: Pachter
Despite a 30 percent short interest, shares of GameStop could see significant gains, Michael Pachter of Wedbush Securities said Thursday.
"If you look at the games industry, it peaked in 2008," he said. "It's declined about 40 percent since."
But that wasn't the whole story.
"If you looked at GameStop's revenues in 2008, $8.8 billion, in 2012, $8.9 billion," Pachter said. "So, they've picked up a ton of market share, and we're now right on the edge of new consoles coming out for their core customer, which is the Xbox One and PlayStation 4."
Shares of GameStop closed at $40.87, up 1.21 percent.
"They are going to thrive when game sales rebound, and I actually think game sales are going to rebound," he said. "I think the stock was weak because people feared digital downloads. All three consoles out in the market are using discs.
(Read More: Yardeni Sees Stocks Going Sideways)
"The used-games market is going to be protected."
(Read More: 'This Is My Worst Call Ever': Michael Pachter)
Pachter said that GameStop's diversification into consumer electronics was positive, as was the company's five-year record of returning all cash to shareholders.
"So, it's a good management team and a good business," he added.
Challenged on the premise that the market for used video games was limited, Pachter countered, "People who don't have jobs and are still in school don't have credit, and they're not allowed to have credit cards.
"They can't buy an iPhone because they can't get the post-paid plan because they don't qualify, so they have to buy a used iPhone if they want one, and they have to pay it through a pre-paid plan, so it's actually a thriving business."
(Read More: Netflix 'A Worse Company Today': Michael Pachter)
Pachter added that providing customers with cash for used video games to buy more video games was still viable.
"It's big business for GameStop, and it matters to 14-year-old boys," he said.