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Found You Guys
I haven't been real active on the StockArena boards as of late,
due to no investment in gaming companies, but I think Gamestop is
looking interesting here. So, I tried to login in to
stockarena and the page no longer exists. I looked around on
yahoo boards, but no luck (Speculawyer is still on the TTWO boards,
WOW). A few minutes googling usernames I could
remember and Jester showed up here, so a quick look and a few
of you appear to have followed - Jon, Jamok, LT, and apparently Rod
is the site founder. Hopefully Buk, Ben & Nsthil
will follow. You guys collectively (and individually) hold a
pretty good grasp of the video game market.
So my questions is what are everyone's thoughts on GME? I
owned it a few years ago and sold it at the then peak around 25,
from which it subsequently cratered to 15 or so, followed by a run
up into the 50's, and the decline to around 38 now. I kind of
wrote it off at the time I sold as a business that would be in slow
decline as game consoles move toward full downloads, but it seems
this transition is taking considerably longer than I
anticipated.
It looks interesting to me - 10x earnings, 3.8% dividend
yield, very strong free cash flows coupled with stock
buybacks. They have figured out a way to at least get a piece
of the download pie through pre-paid cards and the like. Full
download seems to be fairly slow taking off(aside from hardware
bundles), presumably due to the "equity" of trade-in value of a
disc based game. Additionally they have potential new avenues
for growth with the SimplyMac stores and the partnership(s) with
AT&T stores & Cricket wireless. I am still making my
way through getting reacquainted with the company, but I figured I
would run it by one of the smartest groups of video game investors
that I know, to see if I am missing anything material. What's
the bear case?
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Tommy, good to see you, glad you made it. Nsthil knows about
this place, he said he may check in. It doesn't appear that anyone
has up to date contact info for Buk or Ben Martin though.
Re GME I posted after earnings last week, similar thoughts to
yourself really.
marketrap.com/me...rnings
Bull case - huge short interest, 47.257M shares, 43.3% and
rising as they buyback. 10x earnings is fair IMO, and we could
easily see repeated short squeezes. Virtual reality is on the
horizon which means expensive hardware to sell, albeit to a likely
niche market, but it could bring hype.
Bear case - I still believe they're doomed long term. In the
medium term, the stock could be 10x earnings a year from now and
still be $38, so the only benefit to a shareholder is dividend,
which makes it a Sell relative to other places to put money. That's
not sexy. Neither is transforming into the new Radio Shack.
I think the best way to play it this year is selling options
premiums for the volatility. I'm assuming it'll spend a lot of time
in the $35-$45 range. In the months of dividends you could even buy
the stock and sell covered calls. You could offset against a
potential market shock causing a crash (because let's face it, if
the market tanks GME will likely be very weak) by buying otm puts
for 10c say.
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Author:
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Jester
Debunker
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Subject:
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Off Topic
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Sentiment:
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Neutral
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Date:
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03/30/15 at 2:13 PM CDT
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Good to see you around Tommy! I did the same thing when
Stockarena crapped out and was amazed to see speculaywer still
around on yahoo. Jester and I traded a few emails and decided to
come over here because even though it is not active, it is up!
Maybe we can help activate it. Who knows!
Jester, did you talk to Perry? I presume he knows we are
around?
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Author:
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breinejm
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Subject:
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Off Topic
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Sentiment:
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Neutral
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Date:
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03/30/15 at 6:15 PM CDT
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I too think long term GME is toast. Management will have
its hands full, so far they deserve a ton of credit for managing
the company as best as can be given the slow but steady challenges
that are mounting. Management will have to invest in other
products, I am not sure if the biz of used tablets and phones
is making enough progress to offset the decline in video game
sales. If not, then the additional capital investment
required to either acquire or diversify away from VG sales could
put in jeopardy the dividend and buybacks. I am sure the
buybacks will be first to go. GME may be good for a trade, but
I think there are better places to put money to work.
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Author:
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LongTerm
CapGains
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Subject:
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Off Topic
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Sentiment:
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Neutral
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Date:
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03/31/15 at 9:17 AM CDT
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