Author Topic: GME - Game Stop Corp  (Read 26425 times)

Cameron

  • Guest
Re: GME - Game Stop Corp
« Reply #20 on: October 10, 2017, 08:36:17 AM »
This reminds me of Outerwall, but here you have a lot more leverage due to a large retail footprint/leases and with Outerwall you had Coinstar as downside protection. I think it's a worse case, and a lot of people lost money on Outerwall. As yourself if you'd honestly consider GME if it wasn't for the divy. I don't think many would, but it's useless if things detoriate and you end up owning an overleveraged retailed with declining earnings (I think they're in a tough spot but not sure. Just don't see any downside protection, and what's the upside?).


The only thing I can think of that would make the case as to why this wouldn't fall apart is because Microsoft has a new console coming out and the business is cyclical towards new console releases.   
« Last Edit: October 10, 2017, 08:42:59 AM by Cameron »


DTEJD1997

  • Hero Member
  • *****
  • Posts: 1759
Re: GME - Game Stop Corp
« Reply #21 on: February 06, 2018, 11:11:10 AM »
Hey all:

Anybody still following this?

The CEO is stepping down for legitimate health reasons this AM and the stock hit a 10% yield briefly. 

At $16/share, it is at multi-year lows.

Clearly the business is challenged...but they have branched out a bit...

I'm also seeing a local retailer selling digital download codes.  I get TONS of these things as promotional give aways when I buy certain processor types and graphics cards.  I never even considered that they can be resold OR that there would be a demand for them.  Perhaps GME could also sell these?  Heck, I'd be willing to sell mine for a few bucks each...GME sells them for $10 or $15, everybody is happy!

GME has some debt, but it looks like it is well covered by the cash on hand, and cash flows.

Of course, they've also got leases...but I wonder if they've signed mainly shorter term leases and can let stores go empty as the leases expire?

Any thoughts?

GregS

  • Full Member
  • ***
  • Posts: 176
Re: GME - Game Stop Corp
« Reply #22 on: February 06, 2018, 12:01:50 PM »
Took a look this past week.  Two key issues bugging me:

1. Digital share of console game purchases is about 30%.  Why can't it get to around 75% like PCs?  This would hit the largest parts of their business.

2. Technology brands seems like a crappy business that got worse when AT&T bought DirecTV.  I'm not sure the diversification strategy is a good one.

Just bad business trends, so no reason to think earnings will go any higher, and easy to see how they go lower.  On the plus side, any strength in the console/gaming cycle will boost earnings, and the dividend seems well covered for now.  Stock could double and the yield would still be high.

I'm still watching and thinking about it.


GregS

  • Full Member
  • ***
  • Posts: 176
Re: GME - Game Stop Corp
« Reply #23 on: February 06, 2018, 12:04:13 PM »
Of course, they've also got leases...but I wonder if they've signed mainly shorter term leases and can let stores go empty as the leases expire?

They've said their average remaining lease term is <2.5 years, so yeah they can manage store count with runoffs and/or renegotiate rent.

Foreign Tuffett

  • Hero Member
  • *****
  • Posts: 1018
Re: GME - Game Stop Corp
« Reply #24 on: February 07, 2018, 08:07:06 AM »
I think a basket type approach towards beaten down retailers might work, but trying to pick individual names in such a fast moving space is a too hard for me.

So many moving pieces here.....

New CEO with no capital allocation record to evaluate

Lots of enclosed mall-based stores that are exposed to mall traffic trends

The whole digital vs. physical games issue that GME bulls and bears have been arguing about for years. I don't think anyone really knows how quickly physical console games will decline in favor of digital distribution. For year's GME's cash machine has been buying used console games low and selling them high. By all accounts this is a business in secular decline, it's a question of forecasting how the rate of decline, and how well GME will manage the downtrend.

GME is moving more towards collectibles, something I can confirm from a couple recent mall visits. Obviously there's competition in this space from Spencer's and Hot Topic. Also, see the mall traffic issue.

Lots of operating leverage





 




hobbit

  • Jr. Member
  • **
  • Posts: 56
Re: GME - Game Stop Corp
« Reply #25 on: February 08, 2018, 01:00:52 PM »
This looks absurdly undervalued..volatility in market might price it even lower..very interesting
« Last Edit: July 22, 2019, 12:59:53 PM by hobbit »

Foreign Tuffett

  • Hero Member
  • *****
  • Posts: 1018
Re: GME - Game Stop Corp
« Reply #26 on: March 29, 2018, 09:57:24 AM »
My basic take on my the market is pricing this at a very low multiple of 2017 results:

* lots of operating leverage + declining core business (physical video game sales, particularly used games)
* console video game publishers and the two largest OEMs (Sony and Microsoft) would probably like to see GME fade away entirely
* questionable if their core business has terminal value.
* weak 2018 guidance

This might bounce at some point due to the undemanding valuation, but I think there's a good possibility that it continues to be a value trap long term.

Foreign Tuffett

  • Hero Member
  • *****
  • Posts: 1018
Re: GME - Game Stop Corp
« Reply #27 on: March 29, 2018, 10:41:40 AM »
My basic take on my the market is pricing this at a very low multiple of 2017 results:

* lots of operating leverage + declining core business (physical video game sales, particularly used games)
* console video game publishers and the two largest OEMs (Sony and Microsoft) would probably like to see GME fade away entirely
* questionable if their core business has terminal value.
* weak 2018 guidance

This might bounce at some point due to the undemanding valuation, but I think there's a good possibility that it continues to be a value trap long term.

Another possibility is a private equity take out. Apollo bought Redbox in 2016, I could see them being interested in GME at the right price.

Nell-e

  • Jr. Member
  • **
  • Posts: 89
Re: GME - Game Stop Corp
« Reply #28 on: March 29, 2018, 11:36:21 AM »
Could be the next Radio Shack

kab60

  • Hero Member
  • *****
  • Posts: 1004
Re: GME - Game Stop Corp
« Reply #29 on: March 29, 2018, 12:22:36 PM »
I Thing Apollo is a likely suitor at the right price, but Redbox was a much better setup (and I talked with an Apollo guy who said it hs been a good investment). Redbox just needed sensible capital allocation (milk for cash), operating leverage was low and Coinstar was downside protection. GME has high operating leverage  (though short leases are a big plus), and it might be a donut eventually (no terminal value). If one considers investing, ask yourself if you'd be interested without the dividend yield.