Author Topic: GME - Game Stop Corp  (Read 22285 times)

cmattporter

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GME - Game Stop Corp
« on: July 05, 2011, 07:13:05 PM »
Please Comment

Matt
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turar

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Re: GME - Game Stop Corp
« Reply #1 on: April 11, 2012, 11:26:08 AM »
There's already a lot written about it on Seeking Alpha and other sites, e.g.: http://seekingalpha.com/article/458881-gamestop-the-long-and-the-short  (and others: http://seekingalpha.com/symbol/gme/in-focus )

Does anyone here own GameStop?


VAL9000

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Re: GME - Game Stop Corp
« Reply #2 on: April 11, 2012, 12:02:14 PM »
I don't, but the provided analysis tells me what I need to know:

Quote
The proof is in the margins, as the used business accounts for only a quarter of GameStop's total sales, but almost half of its profits!

Digital game delivery will be the new standard going forward.  Next gen consoles, such as the new Xbox, will primarily deliver games based on this model.  This means that the market for used games is going to zero.  Even with physical media today, many games are crippled without the use of one-time activation codes that can't be resold.

So if it's a good buy at half the profits, then it's a good buy.  Without the used game tie-in, the model is much closer to a Radio Shack or a Best Buy.

I like the used device model.  I think it has merit and should be pretty profitable.  But I also think that if it's successful, BBY and/or RSH will copy the model and eat into their profits (as BBY did with used games).


ritrading

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Re: GME - Game Stop Corp
« Reply #3 on: June 02, 2015, 10:36:16 AM »
I couldn't find a GME thread, so apologies if one exists already. I just got notice of GME outbidding Hot Topic for the GKNT acquisition. Has anyone been looking at GKNT? I'm trying to figure what GME's angle is here. It looks like they're overpaying for a company which brings in no income and I'm a bit irritated as a GME shareholder.

Moht

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Re: GME - Game Stop Corp
« Reply #4 on: June 02, 2015, 01:18:50 PM »
Yes I've followed GKNT pretty closely.

The key with Geeknet is their Geeklabs products.  They create proprietary toys, gadgets and apparel that cater to the same crowd GME caters to.  It has a 35% gross margin, versus their website products which are close to 12%.  I think that's the secret piece to it.

On the profitability side, Geeknet could be profitable.  Unfortunately, they're subscale.  Ideally, they'll be able to leverage GME's distribution facilities and logistics to sell Thinkgeek.com products.  They had huge issues in the second half of '14 with order fulfilment and website traffic.  The website crashed on Cyber Monday, to give you just one example.

My high level analysis:
$20 price = $95M enterprise value for GKNT.
2014 Gross Profit (certainly a trough number) = $24M
Price Paid: 4x Gross Profit

2014 EBIT: -$8.3M

What adjustments can we make to the combined GME/GKNT?

For one, no more G&A.  So back that out.  That's $8.3M
And technology related expenses are certainly redundant as well.  That's $8.6M
And the sales and marketing...assume there are some synergies, so lets back out just 25%.  That's $15.7M x 25%, or $3.9M

That's an adjusted EBIT of $12.5M, or EV/EBIT of 7.6x

So not a terribly aggressive paid.  And 2014 was certainly a trough year.

Another hidden asset, maybe, is the Geeknet Twitter and Facebook page.  They have like 100,000 followers and fans.  That's worth something.

RadMan24

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Re: GME - Game Stop Corp
« Reply #5 on: June 02, 2015, 07:59:12 PM »
That was a very impressive analysis, besides, the company's capital allocation over the last few years has not been tragic, quite the opposite. I may be biased, as I love how they are always disproving the naysayers. 

« Last Edit: June 02, 2015, 08:00:43 PM by RadMan24 »

ritrading

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Re: GME - Game Stop Corp
« Reply #6 on: June 02, 2015, 09:04:15 PM »
For one, no more G&A.  So back that out.  That's $8.3M
And technology related expenses are certainly redundant as well.  That's $8.6M
And the sales and marketing...assume there are some synergies, so lets back out just 25%.  That's $15.7M x 25%, or $3.9M

Thanks for the analysis. I suspect the reality may be less rosy than this due at least to some upfront costs needed to restructure. I do appreciate the angle that you've given. Costs can indeed be reduced if GKNT has a problem with distribution and can utilize GME's distribution. I guess I'm just used to Apple's way, which is strategic partnerships with suppliers so that AAPL doesn't have to share in mishaps of overpromises and underestimated costs. I would have been happier if GME went that way, but I guess in the grand scheme, GKNT is only a fraction of GME.

Cameron

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Re: GME - Game Stop Corp
« Reply #7 on: October 09, 2017, 10:07:57 AM »
Was wondering if anyone was looking at Gamestop
6x earnings
.88x b/v  1.30 industry average
5x FCF  9.92 industry average
.23 P/S  .59 industry average
ROE and Net Margins in line with the industry average at 15% and 3%
Debt to Equity stands at .35

Has a 7% dividend thats covered 2x by free cash flow.

Anything I'm missing here.

AzCactus

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Re: GME - Game Stop Corp
« Reply #8 on: October 09, 2017, 10:13:51 AM »
I have looked at this and keep looking and looking lol. 

DTEJD1997

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Re: GME - Game Stop Corp
« Reply #9 on: October 09, 2017, 11:18:34 AM »
My big worry would be that most games are going to eventually only be downloads and will thus have no physical media.  This is going to put a pretty big dent in GME's business.

Of course, they might migrate to selling consoles (new & used), controllers, do hickey's, LCD screen repair and so on....but I think it would be a MUCH smaller business than what it is now.

Question is what does their business look like in 4-5 years?

Probably needs a HUGE discount to make it worth while.