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GameStop Corp. Message Board

  • fastmoneypete fastmoneypete Jun 21, 2013 1:06 AM Flag

    Several Reasons Why GameStop Shares Are Going Much Higher

    In the near-term, after a MAJOR blow to the short thesis on the XBox release update and with 36% of the float sold short - shorts have no recourse but to cover in earnest. The possibility of limitless losses is a scenario that even the most dedicated of GamesStop bears are beginning to realize. In addition, quarterly window dressing by institutions looking to boost their portfolio image with GameStop shares is a 100% certainty going into next week through the end of the month.
    In the mid to longer term, with the bombshell 360 (no pun) XBox move on used game play and trade, the bear thesis is for the most part debunked. Even the permabears have got to accept that the bull case for GameStop is bullet-proof for the next game console cycle of 6 years (give or take), with both MSFT and Sony asserting the sale, trade, and rental of used games. Six years is a painfully long period of time on an secular uptick to $100 per share (post 2:1 stock-split). More to the point, GameStop shorts will simply be called out to cover at higher and higher prices in a Tesla-style fashion, as GME stock becomes more and more expensive to borrow (currently encroaching 15% annualized).
    And for those who still believe that the world of gaming is beginning to migrate to digital faster than the next console life cycle ends, think again. First, a good chunk of gamers don't have PayPal or credit cards required for digital downloads. Second, GameStop guarantees a "built-in out" trade-in for any new title purchased on the release (can't do that on digital). Thirdly, 30 million obsessively loyal GamesStop Power-Up Reward members will choose GameStop, a rewards program that no other can (or ever will) match....hands down.
    At the end of the day, it all comes down to a value proposition between the consumer, GameStop, and game publisher, as consumers know they can get resale value out of a new title's $60 purchase from GameStop, which helps drive new software sales in the first place. Without a "built-in out" for that new game purchase, there's a greater chance that alpha consumers would wait well past the first day of release, hoping for a sale - resulting in far less profit for the publisher. Also, GameStop pays out over $1bil in in-store currency from the trade-in of used games, with at least 70% of that going towards the in-store purchase of new games, a win-win for the consumer, Gamestop, and the publisher. Consider this, Take-Two Interactive (TTWO) had about $1.2bil in annual game sales, equivalent to GameStop's annual in-store currency doled out for used game trade-ins alone.
    Even with the nice gains for GME stock over the past year, GameStop is one of the most compelling stock investments short and longer term to 5 years, as physical game sales remain as the primary driver for game distribution with digital sales lagging far enough behind.
    Oh, and lest we not forget the analyst community, who have yet to revise their sales and earnings projections for GameStop much higher - on a less meaningful digital world..........another meaningful catalyst.

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