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GameStop Corp. Message Board

  • paul_speculator paul_speculator Aug 23, 2008 1:15 PM Flag

    Used Game Business.

    I understand how a store could sell used equipment...football, hockey etc...but is the used game business really comparable to this.

    Used games will function just as well as new ones. There is no wear and tear....it will play exactly like a new game. I just don't see how the game makers keep letting this happen without taking some steps to counter it. ERTS, ATVI are losing out on sales and that has got to lead to some friction with GME.

    As long as business in games is booming, no one cares....but when the growth is lower, then they will start making a stink about missing out on sales through this gme practice. Why is bby or others trying to enter this market; they probably see this as a big issue down the road. However, GME will have expanded quite a bit by then...and losing some of this business will lead to serious financial problems for gme...when their fixed costs are higher for the corporation as a whole.

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    • The other thing paul is that you seem to have a short bias, but you're basing it on 'well the market says so'. Just because the price of a stock is at an inflection point today doesn't necessarily mean it's going down - that's either an opportunity up or an opportunity down as you know.

      You are basing the 'down' part on reasoning that doesn't quite mesh up with the facts we are seeing...e.g. here: http://www.fool.com/investing/general/2008/08/22/gamestop-cant-be-stopped.aspx

      So if you are going to be contrarian and say well the facts may be the facts but the future indicates X...and the stock price isn't really moving up despite the good earnings so that also indicates X...i dunno, it's kindof a risky position to take because you are kindof betting that when you wake up tomorrow the sky will be orange instead of blue.

      When pressed to choose btw facts (soaring business, almost a monopoly on used gaming which is the highest margin segment, customer loyalty, demographic penetration expanding, about to unload on the european market, good management team, longstanding demonstrated results) and possibilities (maybe margins will drop, maybe digital distribution will come sooner rather than later), it's probably a safer call to go with the facts.

      Your money to burn though - I think a short-term short position could work just based on the charts, but be wary, as psy said this is GME's strongest part of the year, and an 8.5% float just means that you could be looking at another massive squeeze when aug/sep NPD data comes out alongside the madden results. In 06 and 07 gme had massssive short floats against it and they all got absolutely crushed.

      IMO gaming is displacing hollywood and record labels as the #1 entertainment form in the US, and digital distribution is nowhere near around the corner. The market may not recognize this now but it will soon enough. You don't want to be under the hooves of the thoroughbred of that industry.

      If you're going to short i'd get in and out quick when it runs up 5% after the next npd numbers (as i'm pretty sure it will). There's nothing out there to indicate that there will be a downside surprise to npd.

    • The market is not omnipotent buddy, that's lesson #1 you learn in investing and even more so in trading. If the market priced everything in, we'd all be making a lot more money. Irrationality and runs are what drive trading, not transparency - arbitrage is the reality, not the exception. Get ready to lose a lot of money if you think otherwise.

    • It is obvious that this stock is a target of short sellers.
      And a joy to daytraders.

    • "Yea because (as GME proves over and over again!) what SHOULD be the case is hardly ever actually the case, especially with this stock.

      I can totally see it dropping in the shortrun per the usual post-earnings game...if the game were fair, the rules would have changed by now and it would get rewarded up as it deserves. Such is life. "

      This stock is not manipulated. It is pricing in the longer term. It is pricing in the fact that it is a store chain. It is pricing in that these are not ones producing the games. High store growth is great when business is booming but could backfire when it slows down.

      You cannot argue with the market. It sometimes sees more than you are willing to acknowledge. That is just a general rule.

    • Yea because (as GME proves over and over again!) what SHOULD be the case is hardly ever actually the case, especially with this stock.

      I can totally see it dropping in the shortrun per the usual post-earnings game...if the game were fair, the rules would have changed by now and it would get rewarded up as it deserves. Such is life.

    • "GME business should be gold for at least the next 2-3 yrs..."

      AGREED, but I am still looking at PUTS for the ultra short term. I think there will be a drop in PPS for the next couple of weeks. For whatever reason there is always a drop post earnings.

      But, be nimble and quick.

    • This guy paul's been looking for justications for a short (which he was leaning towards anyways) rather than being objective about it. His points make sense for the ultra-long-term but psy, you are right that ultra-long-term is not what matters right now. There are much better shorts out there - like shooting fish in a barrel.

      GME business should be gold for at least the next 2-3 yrs, and stock should not at this point be pricing in margin competition (since no one else has an effective used gaming business or even close to it), digital distribution (both gme and sony heads have said this is not a feasible model for the full-gaming experience right now), or sales deceleration (every single piece of data shows that this console cycle is just warming up, and analysts are beginning to realize it). Stock is actually mis-priced right now to the downside to account for vague assumptions on future trends that may or may not pan out.

      Tiernan Ray on Barron's said it best when he implied that the stock action does not seem to be matching to the 'knowns' around the company. The analysts backed that up in the conf call. This stock is being kept down due to market factors and being lumped in with other retailers that it really doesn't compare to, so in this case, for now, irrationality is trumping the so-called 'facts on the ground.'

    • >> I don't believe will be as good as EXPECTED given the consoles have been out already.<<

      I'm not really sure what you mean by that statement. I pointed out that at the cyclically slow rate of 2 Million consoles sold last month in the U.S. and using a VERY conservative estimate that will merely be matched by Canada, Europe, and Australia you get 4 MM consoles/month x 12 which is nearly 50 MM more consoles that will be selling games this season vs. last. However, I'm sure we can all agree those estimates are ridiculously understated and could be 50% or more higher in reality since many months sales were much higher than 2MM in the US alone. What makes you think owners of these consoles will not be buying multiple games for themselves and others when such huge hits are coming out. Don't give the line about a slowing consumer, because even bears should know by now that is one place the consumer is not cutting spending, rather they are acclerating.

      >> There is no room for disappointed and I suspect August NPD will not be good .<<

      The comment about August sales you clearly forgot about the mega hit Madden 09 that came out this month on the 12th which many expected sales to disappoint and on the contrary, sales exceeded expectations.. No room for disappointment going into the Christmas shopping season is true, but betting on disappointment is incredibly risky considering how huge sales growth WILL be with all the huge hits right around the corner. And don't forget about big PC hits as well.

    • GME is a crowded long right now. Otherwise, the stock would have gone up to about 48-50 on that kind of earnings. That means the crowd is just too long the gme going into year end. In a bear market, things don't play out like that. The selloffs happen when you least expect it.

      I think hedge funds are shorting this stock...shows 8.5% float is short while retail/mutual funds are probably very long.

      The good story into Christmas is expected but weakness in this period is not. I realize people talk of games upcoming. I don't believe will be as good as EXPECTED given the consoles have been out already. There is no room for disappointed and I suspect August NPD will not be good .

    • I forgot to add to my bullish argument going forward is an incredible lineup of games coming soon which will be a nice lead into the Christmas shopping season. If you know anything about the industry you would know summer is the slowest (though sales and profits were still very strong) and Christmas sales are always huge. Therefore, buying in the summer and holding through late December is usually very easy money and a suicidal time to take a medium term short position. Even to take a longer term short position now seems odd, because you could wait until right after Christmas at what should be much higher levels so you'll have to wait out a trade that could go heavily against you before getting back even months later.

      What makes you think GME will fall as business starts to accelerate even further from both seasonal sales and huge releases just around the corner? You're really going against the grain going forward IMO. A short sale after Christmas going into summer sure (I may short then depending on the market), but summer into Christmas? Talk about risk! The easy money on the short side has been made and now you're really pushing your luck.

      Are you short now? If so, I would cover if the stock touches 40 if I were you, because I don't see it going lower than that this year.

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