Thoughts? Sounds like a lot of pessimism over a beaten up company with a strong balance sheet. Analysts concerns for moving from physical to digital seem to be overdone to me. Moving to a digital platform for video games means that everyone must have an internet connection. That's a big problem. The big boys will lose a big chunk of sales just from doing that. Physical video games will still be big just like they have been for the past 30 years. The move to be all digital is much much harder than anyone is considering. It's at a minimum 6-12 years out if it does in fact go full fledged. It'll be a slow progression, and it will be tough.
If it were to go fully digitally, a few things to consider. 4G LTE on my phone is still very spotty. 5G will be coming, then 6G and so on. If a system comes already suited with a data plan, will it be able to handle a gaming experience without interruption? If so, will you be able to afford it every month? The answer for most is NO. Everyone will own a new PS or Xbox 720 for the next 6 years and purchase games (new or used) from Gamestop. Gamestop has ample time to do what is needed to stay with or ahead of the game.
Some very large hedge funds have been shorting GME for a couple of years. They are well funded, so they are in for the long haul. If their thesis is correct, they will make a lot of money as GME slowly dies. If management is able to transition from physical to digital, while diversifying their business into areas beyond video games, they will see revenue and earnings growth in 2013, and you will see the mother of all short squeezes. I have never seen 60% of a companies float short at one time. This is a case where it really depends on the quality of the people running the company. We all know that GME would slowly die if they tried to maintain their physical game revenue, and that is what the shorts are expecting. I happen to think this company has some very talented people running it. I anticipate the declining revenue and earnings for 2012 as the analysts do. But, I also anticipate them raising guidance next year, and that's when I think we see some serious short squeeze activity. The big unknown is where the stock price will be at that time.