GME - Game Stop Corp

[Foreign Tuffett]

Almost exactly one year from when Burry's open letter to the board created a bit of a short squeeze.

I suppose it doesn't take much for a battleground microcap with high short interest to pop.

[Foreign Tuffett]

$252.2 million of gross profit for "over 5,100 stores across 10 countries" (per 10-Q). That just isn't sufficient.

The basic problem here is that GME lost their big gross profit generator (pre owned games) and has never been able to replace it w/ anything else.

[roark33]

Yeah, and now they are burning their inventory to stay cash flow positive.  That can only last so long. 

[Foreign Tuffett]

https://www.bloomberg.com/news/articles/2020-09-21/top-gamestop-investor-wants-to-turn-retailer-into-amazon-rival

This is a remarkable situation, in which the new activist apparently wants to "broaden GameStop’s online selection and compete head-to-head with some of the biggest e-commerce companies....Rather than just offering video games and a smattering of toys, clothing and accessories, GameStop’s website would sell a wide range of merchandise and ship it to customers more quickly"

I want some of what he's smoking!



Anyway, good call by writser that all this hubbub could lead to a short squeeze.



"The new Microsoft and Sony gaming consoles have disc drives, which means many consumers will still be buying physical media for them -- a boon for GameStop."

Um, the above sentence from the article isn't even accurate. It should read as follows: "Some of the new Microsoft and Sony gaming consoles have disc drives..." or "Two out of the four new Microsoft and Sony gaming consoles have disc drives...."

Bloomberg needs to hire some 16 year old Call of Duty-playing kids to proofread its articles. 

[dcollon]

This is interesting

https://seekingalpha.com/news/3620893-gamestop-strikes-deal-microsoft-includes-cloud-operations

[Stuart D]

Up another 40%,
The swings on this name are wild!

[dbuch]

https://www.wired.com/story/you-should-buy-disc-drive-playstation-5/#intcid=_wired-right-rail_a6fbe0c1-f115-41bc-91e4-a143ae198162_popular4-1

[RadMan24]

https://www.wired.com/story/you-should-buy-disc-drive-playstation-5/#intcid=_wired-right-rail_a6fbe0c1-f115-41bc-91e4-a143ae198162_popular4-1

Ultimately, the disc based consoles will be for the enthusiasts. Blu ray discs are still superior to streaming movies, particularly for those who have the right equipment and that will likely always be the case due to bandwidth issues.

From an investment point of view, shorts once again got burned heading into a console refresh, yet from here, the bullish case is quite murky and difficult to analyze.

[Foreign Tuffett]

I thinks this is the third round of activism in just the past couple of years.

https://www.sec.gov/Archives/edgar/data/1326380/000101359420000821/rc13da3-111620.pdf

What is remarkable to me is how little understanding any of the activists have demonstrated of GME's core business. Take this sentence for example:

"To add insult to injury for GameStop’s stockholders, the size of the global gaming market has grown by more than 2.5x since the last console cycle."

How relevant is that, really, given that mobile (smartphones) and East Asia (China and SE Asia in particular) have outpaced overall global gaming market growth, and GME has very little exposure to mobile gaming and zero exposure to East Asia.


This is what Cohen wants GME to do:

"In this spirit, we urge you to quickly provide stockholders with a credible and publicly-available roadmap for cost containment, prioritizing profitable retail locations and geographic markets, and building the e-commerce ecosystem gamers deserve."

Um, that is basically just a regurgitation of the management's current strategy. Management has been cutting costs and closing stores, closed down Scandinavian operations altogether, and recently revamped the website and mobile app. So he is basically just taking the company's current strategy and regurgitating it back to management. Truly galaxy brain levels of strategery.


Edit: I have not been long or short GME since last year.

[roark33]

Yeah, I was just reading this letter thinking, what exactly does it mean to invest heavily in e-commerce.  Buy Steam, beat amazon with delivery times?