Author Topic: GME - Game Stop Corp  (Read 69409 times)

5xEBITDA

  • Full Member
  • ***
  • Posts: 204
Re: GME - Game Stop Corp
« Reply #190 on: November 17, 2020, 08:24:21 AM »
Unfortunately, baring a pretty severe downside surprise with Q4/holiday sales, I threw in the towel on the credit negative thesis on GME since I was anticipating a more dramatic credit event in 3Q or early 4Q relating to insufficient liquidity. They successfully completed a sale leaseback, calmed the market with their (only partially) successful exchange offer and have stated their intent to retire the remaining junior bonds, and have garnered renewed interest in the situation as reflected by the growing equity valuation.

However, I could not be more in agreement with the above that no one in the situation has demonstrated real knowledge of how the Company's business model works. It has almost nothing to do with e-commerce and everything to do with their used game business. Perhaps the recent activists do realize this, but can't outwardly say it because it would definitely cause a panic for the situation.  Shrinking the Company's physical footprint as much as possible is really the best way to combat this problem, which is in line with the suggestions. I doubt margins on used games will be as high as current if you shift that business to an online fulfillment. I believe each store's used inventory is sourced directly from the store itself via trade ins, I don't think there is some central distribution of that stuff. Maybe there is some regional sharing among clusters of stores, I'm not sure. But you need the retail footprint in order to get that stuff back to customers quickly and with basically all margin.

One thing that struck me is odd is the chatter that GME is going to retain some percentage, definitely a single digit basis point, if any, of all future DLC/micro-transaction content that is purchased on any microsoft device bought via GME? I have seen several people state this citing some conversations with GME IR, but have not yet seen any specific confirmation from the Company. This could potentially be a shoe to drop on their next earnings call because I suspect it will be brought up. I wouldn't be surprised if this was maybe some deal that was inferred and never explicitly stated by the IR people, because otherwise the recent deal with microsoft doesn't really do much for GME at face value.


roark33

  • Guest
Re: GME - Game Stop Corp
« Reply #191 on: November 17, 2020, 09:49:30 AM »
So many reddit GME longs.  I don't think they understand that mgmt has basically burned inventory to survive and the associated profits with it.  The margins going forward are going to continue to dwindle and this will be a cash consuming business in the next 18 months, unless they significantly downsize their footprint. 

winjitsu

  • Full Member
  • ***
  • Posts: 225
Re: GME - Game Stop Corp
« Reply #192 on: November 17, 2020, 11:02:46 AM »
So many reddit GME longs.  I don't think they understand that mgmt has basically burned inventory to survive and the associated profits with it.  The margins going forward are going to continue to dwindle and this will be a cash consuming business in the next 18 months, unless they significantly downsize their footprint.

stay off wallstreetbets ;)

lnofeisone

  • Full Member
  • ***
  • Posts: 226
Re: GME - Game Stop Corp
« Reply #193 on: November 17, 2020, 11:42:59 AM »
So many reddit GME longs.  I don't think they understand that mgmt has basically burned inventory to survive and the associated profits with it.  The margins going forward are going to continue to dwindle and this will be a cash consuming business in the next 18 months, unless they significantly downsize their footprint.

I'm itching to reshort (lost a little before). I'm not whelmed by what these activists are bringing to the game but waiting for ER to get confirmation that there is no real improvement and this is still a melting ice cube.

roark33

  • Guest
Re: GME - Game Stop Corp
« Reply #194 on: December 08, 2020, 01:53:50 PM »
$100m ATM offering....

http://news.gamestop.com/news-releases/news-release-details/gamestop-reports-third-quarter-results-positive-start-fourth

GME looked at their stock price....

WSB crowd will probably eat it up....shaking my head.

lnofeisone

  • Full Member
  • ***
  • Posts: 226
Re: GME - Game Stop Corp
« Reply #195 on: December 09, 2020, 04:13:10 AM »
$100m ATM offering....

http://news.gamestop.com/news-releases/news-release-details/gamestop-reports-third-quarter-results-positive-start-fourth

GME looked at their stock price....

WSB crowd will probably eat it up....shaking my head.

It's not a bad idea given where stock is and they bought $100M+ worth last year in the $5 region. Maybe they ought to consider money management once the hardware sales taper off  ::).

Foreign Tuffett

  • Hero Member
  • *****
  • Posts: 1414
Re: GME - Game Stop Corp
« Reply #196 on: December 09, 2020, 07:12:16 AM »
Q3 earning look quite bad, no real surprises there.

I am not impressed by the +16.5% November comps as trivially easy to drive traffic due to (a) the start of the new console cycle, (b) GME making it known that each store would have at least a few new consoles in stock on Black Friday, and (c) this year's Call of Duty launching in Nov instead of Oct.

December could also be strong if Cyberpunk 2077 becomes this year's Red Dead Redemption 2.

Management is smart to want to sell stock into the market. The stock is overvalued and the company could definitely use more cash.

I was briefly short this when it spiked to $19 late last month. Maybe I will get another bite at the apple?
Former Teldar Paper Vice President

RadMan24

  • Hero Member
  • *****
  • Posts: 513
Re: GME - Game Stop Corp
« Reply #197 on: December 09, 2020, 09:11:57 AM »
Q3 earning look quite bad, no real surprises there.

I am not impressed by the +16.5% November comps as trivially easy to drive traffic due to (a) the start of the new console cycle, (b) GME making it known that each store would have at least a few new consoles in stock on Black Friday, and (c) this year's Call of Duty launching in Nov instead of Oct.

December could also be strong if Cyberpunk 2077 becomes this year's Red Dead Redemption 2.

Management is smart to want to sell stock into the market. The stock is overvalued and the company could definitely use more cash.

I was briefly short this when it spiked to $19 late last month. Maybe I will get another bite at the apple?

Short if you want. But keep in mind, the console sales have been limited due to supply chain disruptions, those will abate in the Spring. Further, a lot more people are playing video games on consoles and folks will be buying the new generation hands over fists for the foreseeable future. The long term impact of this will be hugely positive for GME, unless we say a high uptake in the digital only consoles. 

5xEBITDA mentioned this, but I still don't quite see the bull case, but shorting this stock offers very little reward, high risk, and high stress. We've seen it all this year.

The other thing, GME has resources to adapt. Prior management failed, but that's not to say this one will too.

Foreign Tuffett

  • Hero Member
  • *****
  • Posts: 1414
Re: GME - Game Stop Corp
« Reply #198 on: December 09, 2020, 09:40:42 AM »
Q3 earning look quite bad, no real surprises there.

I am not impressed by the +16.5% November comps as trivially easy to drive traffic due to (a) the start of the new console cycle, (b) GME making it known that each store would have at least a few new consoles in stock on Black Friday, and (c) this year's Call of Duty launching in Nov instead of Oct.

December could also be strong if Cyberpunk 2077 becomes this year's Red Dead Redemption 2.

Management is smart to want to sell stock into the market. The stock is overvalued and the company could definitely use more cash.

I was briefly short this when it spiked to $19 late last month. Maybe I will get another bite at the apple?

Short if you want. But keep in mind, the console sales have been limited due to supply chain disruptions, those will abate in the Spring. Further, a lot more people are playing video games on consoles and folks will be buying the new generation hands over fists for the foreseeable future. The long term impact of this will be hugely positive for GME, unless we say a high uptake in the digital only consoles. 

5xEBITDA mentioned this, but I still don't quite see the bull case, but shorting this stock offers very little reward, high risk, and high stress. We've seen it all this year.

The other thing, GME has resources to adapt. Prior management failed, but that's not to say this one will too.

I don't mean for this to come off as insulting or dismissive, but everything you mention is very superficial. You need look at what kinds of gross margins GME earns on the different categories of items it sells.

You should also look at how quickly digital software sales are gaining share on console. A good place to start would be the comments Strauss Zelnick made just two or three days ago, as well as EA's most recent earnings call.
Former Teldar Paper Vice President

thepupil

  • Hero Member
  • *****
  • Posts: 2229
Re: GME - Game Stop Corp
« Reply #199 on: December 09, 2020, 09:50:51 AM »
to be short the stock or long the bonds makes little sense to me. they are both short volatility positions in an fundamental situation of extreme volatility (collapsing sales and share count).

I think the above still applies (with the twist that sharecount is now growing)

there are 67mm shares short, there are 69mm shares, maybe they raise 8mm more. nevertheless, the fact that a very large percentage of shares is short, in my view, is reason enough to avoid shorting this. the 10's of 2023 only yield 8% which is not enough to lend to GME.



« Last Edit: December 09, 2020, 09:58:21 AM by thepupil »