Well done Bhatia. The guy sets a 32 multiple on GME's digital biz hours before NPD shows a 16% decline in retail software sales, worse than analysts expected. This resulted in a 3% pop which faded completely by eod.
I'm sure his clients are grateful. Risk transferred to retail, well played sir.
"We think investors are beginning to take note of (GameStop's) digital growth strategy and will likely assign a higher multiple to that part of (its) business," he wrote.
(Which means he's giving 5% of the business a 32 multiple, to justify the overall multiple rising from 8.5 previously to 10 now. That's one way to say it's like NFLX, giving it an arbitrary high multiple.)
"discuss your precious GME"
Actually a good idea, back to GME. Just thought I'd venture into the mind of our enemy shorties, try to get to know the mindset a little. I see that it's a scary place, stubborn guys holding onto out-dated negativity and willing to go down with the ship. You will be obiliged.
Face it Jester somewhere in your past you got burned on GME stock and you'll never let it go. Invest your money not your well-being please. Your continuous mentioning of some cash bonus executive grant in the past over and over. You are wrong here. Just jilted admit it.
So like I said, give a higher multiple to the growing part of the business, and a lower multiple to the rest. Surely all big companies have some small aspect which is growing, but we don't assume that something like MSFT should double its earnings multiple because Kinect is doing well. That would be crazy, right? So why do you treat this one differently? Even with their own projections, digital is still only 12% of the business in 4 years time, with 88% showing a fraction of the growth.
I have seen that presentation.
Re their 2014 forecast, first of all, last time they gave a long term forecast it was a disaster. So there's a credibility issue there. Likewise, these are the same people who said not long ago that digital was irrelevant, yet now they're pushing it as the cornerstone of the company valuation.
Second, the $2.47BN from used may drop as digital rises, they admit it slowed in 2010, and their own slides show flat new packaged sales growth industry wide, and their store footprint is likely to be flat. However, the guidance calls for "new" sales growth to be 24% in that time (assuming used stays flat). The guidance also calls for 1,000% growth in PC digital, with little transparency for how to get there other than throwing out buzzwords.
Finally, some parts of that presentation try to gloss over reality because it isn't as pretty a picture as the one they want you to see. For example, there's a slide showing a bar graph to denote a 16% cut in capex spending, and the bar on the right is 20%-25% the size of the bar on the left, instead of 84% the size, with a steep downward pointing red arrow to catch the eye. I don't see whey they feel the need to mislead investors like that. They also double count at the beginning by promoting how much they've returned to shareholders and then they promote the eps growth, opting to not mention the smaller earnings growth.
Look at the Investor Day stuff. Seriously. By Memory: They are predicting $1.5 Billion in digital revenue in 2014, with what like $12 Billion in revenue? That's a lot more than 3%.
Look Jester you are and have been a constant negative ninny, so go on and believe what you need to believe. You will be proven wrong, I hope you are still around here when it happens.
Yahoo boards are full of pumpers. They don't need another one.
The stocks I tend to have posted bearish comments on in recent years have also under-performed the market in recent years. Strangely, in Yahoo world, that makes me the bad guy.
Maybe investors should attribute a higher P/E to the 3% of GME's business this applies to, and conversely a lower than current P/E to the other 97% which will be adversely affected by fewer used games transactions.
And I might add: Have you ever stated\said anything positive in your life? My Dad always said, if there's a pattern in your life it's probably you. I think there's a pattern of people jumping off of the nearest bridge after being David Downer'd by your you. Tell me, is this true?
Sorry Jester you're goinh to be proved wrong. The price action in GME lately suggests that it is a widely held belief that GME COULD be like NetFLIX, if it was in response to that article Janney analyst wrote. In addition, GME is just like NetFlix in that they have a a foot, a cash cow I might add, in the physical media world that is FUNDING their switchover to handle digital. Who else is doing this? GameFLY? Please. Also, GME is opening up NEW revenue streams that they do not have now. Take a moment and read the Investor Day transcripts and presenattions there.