Like many others I'm favorably disposed toward GME, having owned it in the past but in the interest of full disclosure I sold my stock yesterday. The reasons are many, but the high short interest has my attention.
The main reason is listed in an article on the Forbes website citing the coming "Bloodbath" in used games. Apparently the new gaming consoles will NOT be backward compatible, greatly reducing the market for used games - one of the highest margin areas of Gamestop's business.
You may agree with the Forbes article or not, but regardless of your position you should at least give it a read.
You can find it here: http://www.forbes.com/sites/insertcoin/2012/03/29/the-coming-war-on-used-games/?partner=yahoofeed
Number one, the new consoles not being backward compatible won't change all the buyers of used games for their old consoles, not to mention for their pc's.
Number two, the methods being tossed around to prevent the resale of used games and all DEFEATABLE, unless game purchases become totally electronic (downloadable). But whether game purchases become totally electronic is not up to the developers and console makers, it is up to the consumer.
Most of these articles are false. The console makers have ZERO reason or benefit in not making their machines backward compatible. The whole reason MSFT was successful in computers is that INTC made the x86 architecture and MSFT made windows backward compatible. They have no vested interest in doing this. The rumors of having consoles with only a hard drive are bs too. Gamers don't want this, nor to the content providers. Its just that simple. The industry wants GME. With blockbuster nobody needed or wanted them and they had mountains of debt so no flexibility.
I think GME might be the laziest short i have seen on Wall Street in years. The shorts are blind that the company is slowly taking itself private. It will take GME about 2.5 years to buy in all its stock at these levels through FCF. with 64mm shares short, it could get ugly.
I think what will happen is that Sony and MSFT will tie the online portion of a game to a unique user...in order to unlock that for a new user they may charge additional money. They may tie the single player portion to the user account also to unlock DLC and other stuff...or completely. They may completely torpedo the used game market, but I think they will reduce the price from $60 to $45 or so for new games if they do that.
In PC gaming, they already have this war against used games...many games are tied to a unique user account like at Steam and violate the terms of service if the user account is transferred to another person. jerks. They need to be brought down!
GME is so effed up it's not even funny. get out while u still can. u don't want to be in a stock that can blow up by 25% in one day on a piece of news that has a pretty good chance of happening.
Chatter, if you are short, you get to control the stock in the short term. But you really don't want to stay short through the next 3 quarters, because GME is going to meet or beat their guidance this year. That means $3.10-$3.30 EPS along with a quarterly dividend and more shares being bought back and retired. If you are intelligent, you know that a $22 share price for a company making over $3 a share with no debt and an agressive share buyback program is a steal.
Sony has failed for many years at making wrong decisions. Locking out playing used games on new generation hardware would upset many a customer. Look at what happened to Netflix after raising prices.....
Customers (gamers) want options and flexibility at the right cost. Any hardware vendor locking out the used game market will probably be the loser.
It should be interesting to see which hardware vendor announces such a lock out of used games and the customer reaction. That in my opinion will be the bloodbath for any vendor.
I have a different view for the new generation hardware. They will offer a hardware compatibility option to play the used game market.
That will be a win win for all....
Ha... so you sell your position on a rumor?
It seems unlikely that the platforms (sony microsoft nintendo) will go purely digital with the next generation. If they all did, it is my opinion that they would not only damage gamestop but also the entire industry. OnLive has not been successful for a reason, gamers like to have physical copies of their games. Netflix was successful because that was the next big thing... Onlive has not been successful because cloud gaming is NOT the next big thing. According to badericclay anyway :)
Lets see if the failure to deliver chart spikes soon... that would more accurately explain the selloffs we've seen with GME
I don't think it's about purely digital any longer. It's now about whether or not these stories about blocking used games somehow becomes true or not. That is step one now. Pure digital would be a step further down the road IMO.