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GameStop Corp. Message Board

  • astrolux astrolux Nov 21, 2002 11:26 AM Flag

    Interesting...

    Virtually all of the analysts covering GME raised EPS forecast for GME by several pennies for '03 (yesterday). Usually considered a good if not excellent sign, yes? Yet the stock doesn't even move with the overall market. Is anticipation of ELBO holding us back? Is that the "second opinion" we are all waiting for? Even with some gross margin concerns, seems that expansion is still underway and the installed base of video game consumers continues to grow, and the product is improving. So where's the downside? Why the low valuation? Any thoughtful feedback appreciated.

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    • I Think ELBO and GME are the two best retailing stocks to play... Strong growth, strong fundamentals (demographics), cheap valuation (remember that ELBO, for instance, has $4 in cash, so its real P/E is around 11x... with 25% growth for next year... appears to me as a cheap stock. My DCF points to $35 FV for ELBO, using a 13%!!!!! cost of equity, and discount the cash by 20%. Someting interesting to do would be to Buy these two against the RTH holder, and just wait... I can assure you one think, videogames will be the major selling piece this xmas, no matter what leading surveys tell you... Furthermore, this increased xmas selling will boost the 1H03 used games market, which will in turn, imply margin gains...

      What is curious is that when I look at my ELBO model, for the 4Q I simply cannot reach the guidance the company gave... It is just too conservative... I would hope ELBO management raises the guidance today, or at least narrows it for the 4Q, so that these two stocks can recover from what I think was a major mistake from GME's management... the way they approached the 4Q in their conference call.. If they changed 2 words, GME would now be at 22, and Elbo at 30 looking for 34 at earnings release... I think ELBO's management will just have to fixed what GME's did...

      I wonder, how can a bunch of guys runs a 1.5 billion dollar company, and not have a clue how to manage the market's expectations... I hope next time they hear Outback's call, and learn what is the best possible thing you can do... OSI came out with in line earnings, and the stock went up 20% in the next week... all due to the conference call speach...

 
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