Video Games Aren't Just for Kids

Friday, 26 Oct 2007 | 11:37 AM ET

Mark Penn’s new book, Microtrends, uses chapter after chapter to highlight some of the U.S.’s most under-the-radar demographic groups. Cramer has been translating those groups into investment ideas, and Thursday’s focus was on adults who play videogames.

Microtrends: GameStop
GameStop has had a nice pullback, it's a great stock and now it has microtrends on its side, says Mad Money's Jim Cramer

Believe it or not, the average age of a videogamer is 33, which is up from 24 in 2002, according to the Entertainment Software Association. And gamers over 50 make up a full quarter of the playing population. Cramer thinks GameStop is best poised to profit from this trend.

Adults can pay more for games than kids can, and they can afford to buy more games, too. So adult gamers are good business for GameStop. So is the fact that so many strong titles are awaiting release that game makers are waiting until after the holidays to keep their products from getting lost in the seasonal rush.

GME is also growing outside the U.S. Around 23% of the business is international, and the company said it plans to expand its store base, now at 1,100, by 300 outlets a year. Also, as game publishers invest more in Europe, GameStop should have a better selection of games to offer.

Normally, Cramer wouldn’t recommend GME so late in the season, but the stock has pulled back more than three points from its 52-week high. And, trading at 27 times next year’s estimates with a 21% long-term growth rate, it’s cheap. Cramer thinks GME deserves a 35 multiple, which makes this $57 stock worth $70.

With a nice pullback and the best holiday season for video games in years, Homegamers might want to consider buying GameStop.

Questions for Cramer? madmoney@cnbc.com

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