What GameStop's Brutal Week Means for Investors

After obliterating the market in 2013, video game retailer GameStop finally saw the other shoe drop this week when it announced weaker-than-expected sales for the all-important holiday season.

GameStop's impressive rally had always been somewhat improbable in some investors' minds, as the company faces pressures from a number of industrywide shifts that many fear could hurt its core business in the future.

And unfortunately for GameStop shareholders, the report this week only helped to confirm this notion.

Look out below
During the holiday season, GameStop saw strong hardware sales as demand for recently released next-generation consoles like Microsoft's Xbox One and Sony's PlayStation 4 grew overall hardware sales 10%. However, as the result of steep discounting, those sales were relatively low-margin sales.

And perhaps more alarmingly, GameStop's software sales also fell off a cliff, declining a depressing 22% during the quarter. This renewed concerns that digital downloads could derail this key aspect of the company's sales model sooner rather than later.

In the video below, tech and telecom analyst Andrew Tonner looks at GameStop's rough week in greater detail and discusses how investors should look at the stock as we head further into 2014.

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The article What GameStop's Brutal Week Means for Investors originally appeared on Fool.com.

Fool contributor Andrew Tonner has no position in any stocks mentioned. The Motley Fool owns shares of GameStop and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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