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GameStop Corp. Message Board

  • sniazk2002 sniazk2002 Apr 19, 2010 10:03 AM Flag

    Upward movement not justified

    This stock's appreciation over the past month is not justified. The company has awful numbers and is seeing revenue declines due to competitive business. The company continues to have high lease rates, poor distribution and little barrier to entry. Used game sales are increasing on the internet and new game sales are cheaper elsewhere. It's hard to justify the recent movements aside from pure speculation.

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    • If you have a short time frame for this short, like 1-2 weeks, and a close stop above recent highs, then I think this is a pretty good short here. The stock has run up a lot and will probably pull back, we are currently at 10 straight days up, and really there has been no pullback at all from 17 to 25.

      But while I think GME should have a pullback soon, it wont pull back for long, and not as much as you might think. The real money is going to be made going long GME after this pullback. (And was made going long after the bottom at 17).


      "This stock's appreciation over the past month is not justified."

      It is, the stock remains undervalued based on traditional P/E, EV/EBIDTA, etc ratios. GME greatly overreacted to the downside with all the negativity up until march, and the stock is now rising back toward fair value.

      "The company has awful numbers and is seeing revenue declines due to competitive business."

      This is just wrong. GME grew its market share and captured the greatest share (US) that it has ever had. Revenues were up for 2009 over 2008, even in a terrible year for the industry. You might have been able to say competition in the business was increasing a few months back, but then Walmart and BestBuy pulled back out of the used game market. GME won. They are the ones killing the competition.

      "The company continues to have high lease rates, poor distribution and little barrier to entry."

      I dont know much about the lease rates, but GME lists a great deal of value on its balance sheet from leases, reflecting the difference between what they have signed leases for and the market rates. This indicates to me that overall, their leases average below market rates.

      Poor distribution? Based on what?


      "Used game sales are increasing on the internet and new game sales are cheaper elsewhere."

      GME's used game sales were up significantly in 2009.

      "It's hard to justify the recent movements aside from pure speculation."

      Returning to a fair valuation, perhaps?

      • 1 Reply to alex11235919
      • It truly is amazing. It's like they don't realize this was a $60 stock, with less market share growth, before the recession.

        Now, it's not a $60 stock just as the Dow isn't a 16,000 market anymore. But where is fair valuation? That's what we're finding out right now with GME (I still think GME is catching up to reach the overal market's "fair valuation," hence still moving up on down market days). I don't think it's there yet. I think $30 is a real possibility and I hope for $40, but I'm not holding my breath.

        I traded in and out in the $60s and lost some money. I bought in the $30s thinking it had been hit enough (still holding those shares at a loss). I bought again in the high teens and low 20s for an average share price of $20.60 thinking it was ridiculously beat down. We'll just have to see, but I've haven't seen the stock look this strong since I've been investing in it.

        Honestly, anything is possible in the market $12 or $40. We all just have to make our best educated guesses. No one "knows" anything.

    • To all the morons - yes I shorted at 25.60.

      Here are some key insights why:

      Ex-early buyback, guidance below consensus. While the firm guided
      EPS above the Street, the net income implied by company guidance of
      $408 mn falls short of prior consensus of $422 mn, and closer to our prior
      forecast of $407 mn. The upside to EPS as one-time in nature.

      Downside risks: digital downloading, lack of product cycle. Upside risks:
      console peripheral launch in fall and easing compares

      2010 : 15% ROE with 4.5 EV/EBITDA - 2011: 14% ROE with 3.1 EV/EBITDA.

      • 3 Replies to sniazk2002
      • So where exactly would GME be fairly priced? are you looking for a small drop to 22 range? or a huge drop back to the 17 range or even lower?

      • Timing is everything and I think you blew it. If you shorted and are anticipating holding that position beyond 6 months you have almost assured you're going to loose your butt.

        Q1 is forcast to be the weekest of next fiscal year and it's looking like Q1 isn't going to be all doom and gloom either. If the Q1 report is better than expected it's over for the shorts this FY.

        I also disagree with your downsides within the intermediate term. You also didn't mention the possibility that the economic situation could deteriorate.

        As for your upsides you forgot to mention the introduction of new accessories (like the Move controller), the economy improving better than expected, and also the possiblity (although remote) of a buyout.

        I worry about the economy but overall I'm fairly confident GME will deliver. Time will tell who's right and I hope my winning track record over the last 7 years (including 2007, 2008, and 2009) continues to hold this year.

      • As long as you shorts consistently report that you made money when you were wrong\didn't do what you stated that you did, won't admit when you are wrong, caveat or spin what everyone read you as stating after the fact to prove that you were right, blah , blah, blah. In those cases, 100% here, you're opinion is just wasted time for the reader. You will lose on that bet but I'm sure you'll be here at some point in the future stating that you made the right move. Talk to the hand shortie.

    • "The company has awful numbers and is seeing revenue declines due to competitive business."

      Really?

      08 Rev 8,805,897
      09 Rev 9,077,997
      F10 Rev +4% to +6% growth

      "The company continues to have high lease rates, poor distribution and little barrier to entry."

      I guess that's why WMT and BBY bombed out of the used game business? Because of those weak barriers to entry?

      If you are going to try and talk the stock down to cover your short position at least come up with something vaugely convincing.

    • Can you please give any numbers or reference to your arguments?

      Thanks in advance.

    • It is justified as is the price target of $35/share. Sorry you are short and losing. I warned the shorts when the stock was under $20 to take profit or get scorched. Some listened and did fine. Others got wiped out.

      If you are short and don't want to watch a 10 point run up from here destroy you then you might cover and then think about shorting as the stock approaches 40

    • You know what though? $2.00 down because WMT had a Xmas sale on new games over the holidays, and $2.00 more down because a loser CEO quit weren't justified either. As far as I'm concerned we're right where we should have always been before those two ridiculous moves. See you at $30

    • then short the stock. It's going up daily, up 3% when the rest of the market is flat.

      The videogame market has been a great place to be and still it trading at a very low P/E

 
GME
44.09+1.24(+2.89%)Jul 22 4:03 PMEDT

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