Very close race between josuahtree's daily posts and the number of daily new games / hardware announcements:
So far today, we have Super Mario Galaxy 2, Metroid other M and DSI XL from Nintendo (all coming in the next 2 quarters) but with 4 posts, Josuha is definitively in the lead.
You're describing a "value trap", which has already been bandied about by a host of people. I can't speak of the future, but Gamestop is not a growth monster like it was in '04 to '07, I agree. However, it does have upside, because it's being discounted based on stuff that has not happened yet, namely its demise to competitors or competing technologies. NetFlix as I stated is not being discounted for essentially the same perceived issues as GME. Barnes & Noble is not a growth monster either and its valued at mid-teens P\E. GME has grown mainly through acquisition. They have mucho cash to create opportunities in the future. I am not comparing GME to Google but how many people thought Google was just another internet search engine company? GME has a better opportunity then NetFlix for long term survival.
"Regarding the brick and mortar: That is an ASSET."
So long as it's producing income.
To be clear, I'm not interested in debating when GME may go bankrupt. That's a very long way away. I am interested in when earnings will peak and what that peak will be. I think it will be sooner than many think, because a big driver of earnings growth has been store expansion and e.g. I have 11 GME stores within 10 miles. How many more could I need? I believe the P/E will be closer to 5 when this event happens, meaning GME will likely be low teens within a few years. Yes, it will still continue to generate cash. Yes, it won't be going out of business any time soon. Yes, digital will still be nowhere near 100% and discs will still be sold. However, the stock price will be lower. So I don't think there's much upside for shorts or longs right now.
Jester: My point is you have to be consistent in the analysis. It looks like you are saying that NetFlix will die eventually too. Ok I can accept that because it's consistent thinking. The rest is pure speculation. In my opinion, NetFlix is a dinosaur with a huge asteroid coming on. It's a case of musical chairs, valuation wise. There are no barriers to entry to streaming movies (it's future?), bigger players will crush them, they are being sued by the movie studios, even the Post Office is a dinosaur regarding regular carrier services, losing $1 billion and cutting back to 5 day delivery. USPS carrier services is basically kept alive by the profits of USPS parcel post. Soon this could go away. NetFlix has POLE POSITION in their business right now and is profitable. Same as Gamestop. Regarding the brick and mortar: That is an ASSET. Not sure where you got your accounting degree. I don't know the details about what they own and what they lease, but there are tangible assets there.
"Jolt Online. That's just the start."
Never heard of it.
"And your explanation of NetFlix not being obsolete by using streaming is dis-ingenious. NetFlix is facing most of the same issues that you are recognizing in Gamestop and more."
I'd say it's disingenuous to equate a 30GB movie download with a game that could be as small as 10MB on iPhone or 128MB for a large DS game, or up to 9GB for the biggest 360 game. It's also disingenuous to imply a company with low fixed store costs is in the same position as a company with high fixed store costs. Would such a service eventually succumb to progress? Probably. If we say it was first BBI, then a few years later GME, then a few years after that it could be Netflix postal service.
BBI and GME dominate brick & mortar.
Coinstar dominates kiosks.
NFLX dominates mail.
Everyone & their brother is trying to dominate electronic delivery of various types.
Which categories will win & which will lose?
>>I don't know anyone who has become a GameStop customer because of their online service<<
Jolt Online. That's just the start. And your explanation of NetFlix not being obsolete by using streaming is dis-ingenious. NetFlix is facing most of the same issues that you are recognizing in Gamestop and more. Anyone can stream movies, there is not much of a "barrier-to-entry" to do this. Plus, NetFlix might have to self-kill their mail-delivery business in its entirety anyway if the movie studio lawsuits are successful.
"The stock is reported as 95% institution owned. How much more could they accumulate?"
Nobody ever counts shares :-) And that doesn't signal accumulation.
"Isn't NetFlix bread-and-butter business a model soon to be out-dated?"
They're a lot better positioned than a company with thousands of brick and mortar stores, all those overheads, leases, employee costs, etc. etc. I would note that every HD movie is about 20GB-30GB in size, but only a tiny % of games are that large, and anyway, Netflix is supporting streaming and apparently doing well from it. I know people who have joined Netflix because of the streaming. I don't know anyone who has become a GameStop customer because of their online service.
Jester: The accumulation comment wasn't mine. The stock is reported as 95% institution owned. How much more could they accumulate? I still would like to read your comments on why NetFlix is not considered to be following the same valuation path you state that GME is. Isn't NetFlix bread-and-butter business a model soon to be out-dated?
I do think GME will become a BBI, and it will take many years. I expect trading ranges to decline when GME's earnings peak due to store saturation, margin pressures, etc., so instead of 18-25 it'll be 15-21 and so on. I think it'll be at least a few years before GME hits single digits.
I laughed at your "accumulation" comment because there is zero evidence for you to say that. It's pure wishful thinking, and it doesn't even make sense. Why would anyone accumulate something with an uncertain future? If they were making a dividend or a coupon that might be different.
"If they are squandering the billions or not giving good guidance on their future plans, then I would be out of here too."
Well, they're giving management a $20/share cash bonus for every share they're giving them, which IMO is squandering. It's a pre-emptive reward for failure. An insurance policy to save the execs only, at the expense of shareholders. And they are giving zero guidance on their future plans. Do we know anything about their alternative model ideas? Anything about store count projections 2, 3, 4 years out? No, all we know is this years guidance, something they've been wrong about for a while now.