GameStop Corp. (NYSE: GME) is constantly thrown out as a takeover candidate for a retail oriented private equity firm.  It is cheap on almost all stock market metrics at less than ten-times earnings for this year and next year.  At issue is that game stores are slowly facing more download competition from game publishers who sell direct via downloads now.  All those “App store downloads” to smartphones bypass GameStop and may actually cannibalize some of GameStop’s revenues.  That trend will not kill the video game retailer overnight, but even if that trend skews over a ten-year period it could mean that GameStop has some of the same traits as tobacco companies faced in the past when it comes to forward revenue trends.  You get a cheap stock today with P/E ratios under 10 and at a fraction of revenues.  As the stock has already bounced off of lows, that is just another reason to look elsewhere.

Activision Blizzard, Inc. (NASDAQ: ATVI) might seem an obvious win for its major score with “Call of Duty: Black Ops” and with all of the World of Warcraft recurring revenues now that Blizzard and ActiVision are one.  Throw in Quake, “Hero” and the rest.  There is just one problem and that is that has been a long and slow steady grower now that it is the largest video game publishing house in the world.  It has an awesome game lineup and is sure to have clarity of forward revenues.  Shares are around $12.50 and the average price target is $14.43. Whether it is fair or not, its near-$15 billion market cap is just already big enough that we’d look elsewhere.

Electronic Arts Inc. (NASDAQ: ERTS) has gone from hot to snot and those old share prices of $50 and higher from 2006 to 2008 are as much of history as World War II documentaries.  A spate of earnings warnings has acted against the company and the attention of the gaming world outside of sports games has moved away from EA.  Still, see more as this goes on.

THQ Inc. (NASDAQ: THQI) is one we already called on to nearly double, and it has done some of what we expected and then some. Much of our thesis revolved around it new hit uDraw system, meant for kids but with an implied ‘grabbing-up effect’ for the parents.  While we still think the turnaround is working, we would be more inclined to tell our readers to take half of those profits and not even bother looking back.

Take-Two Interactive Software Inc. (NASDAQ: TTWO) is one that has been plagued with many problems in the past and a management team that seemed to be willing to keep it from selling no matter what.  Still, with shares up around $12.25 it has already risen more than 50% from the summer lows. Maybe the turnaround is intact, maybe not.  Either way, we are looking elsewhere whether it is fair or not.  Analysts have a price target of $15.05.

Microsoft Corporation (NASDAQ: MSFT) has scored with its Xbox Kinect and it may still be able to live on part of the Halo success.  While there are some limitations and while the game selection may not be the same yet for Nintendo (NTDOY) and its Wii system, the week before Christmas data showed some 4 million units sold.  Unfortunately, Microsoft cannot be evaluated on Xbox alone even if it sells many many more units.  Some food for thought: those sales may help offset any weakness in Windows sales going into 2010 as tablets are taking more of the buying.

If there is one real problem in the wide world of video games, it is Apple Inc. (NASDAQ: AAPL).  Steve Jobs has overrun the world with iPhones and iPads, something which will remain in 2011 as competitors stagger their own ‘me too’ tablet launches.  Where Apple’s big fault here happens to be is that the App store has many many games that sell for roughly $1.00 for the iPad and iPhone.  As we all become less social and more glued to our smartphones and tablets, ask yourself how video game companies have as great of time ahead when they try to sell new games at $59.99.  The Apps can steal and steal video game business away, and the loss of business just cannot even begin to be made up even if video game publishers corner the $1.00 game market ahead.