Opinions
Liz Young, Head of investment strategy at SoFi
GameStop Corp.
GME-N
COMMENT
Jun 07, 2024
Stock price when the opinion was issued
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Gamestop is a family of specialty retail brands that makes the most popular technologies affordable and simple. we are a global retailer of multichannel video game, pop culture collectibles, consumer electronics and wireless services, operating more than 7,500 stores in 14 countries across europe, canada, australia and the united states.
Keep in mind GME is a stock we have deliberately chosen not to follow too closely, as it would use up pretty much all of our time with the craziness it exudes. The financing puts it into decent financial shape, with about $1.8B net cash now. But, cash flow was negative $204M in the last 12 months. The issue comes with dilution, and even with a 6-fold increase in EPS expected from 2025 to 2026 (January year end) that still only amounts now to 6c per share, at best. So the P/E, as they say, is way up there. It still has a 21% short interest. IF GME makes an acquisition we might be more interested in it. But as it is, its revenue is about 40% lower than it was in 2018, even with higher inflationary forces. It is very hard to succeed, long term, with such declining revenue. It certainly is not a stock we would be comfortable owning, unless for pure amusement purposes ala a lottery ticket. The financing will give it flexibility, but this in itself does not guarantee a 'turn'.
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You shouldn't connect this to the health of the market. There's a big chance that a lot of people will lose money in GME, which concerns him, because the regulators will get involved. The economy needs healthy markets and GME is unhealthy. There's something funny going on here and we need to get to the bottom of it.
GameStop Corp., a specialty retailer, provides games and entertainment products through its e-commerce properties and various stores in the United States, Canada, Australia, and Europe. The company sells new and pre-owned gaming platforms; accessories, such as controllers, gaming headsets, virtual reality products, and memory cards; new and pre-owned gaming software; and in-game digital currency, digital downloadable content, and full-game downloads. It also sells collectibles comprising licensed merchandise primarily related to the gaming, television, and movie industries, as well as pop culture themes. As of January 29, 2022, the company operated 4,573 stores and ecommerce sites under the GameStop, EB Games, and Micromania brands; and 50 pop culture themed stores that sell collectibles, apparel, gadgets, electronics, toys, and other retail products under the Zing Pop Culture brand, as well as offers Game Informer, a print and digital video game publication featuring reviews of new releases, previews of the big titles on the horizon, and coverage of the latest developments in the gaming industry. The company was formerly known as GSC Holdings Corp. GameStop Corp. was founded in 1996 and is headquartered in Grapevine, Texas. Social media mentions are up 138% in the past 24h.
GME reflects high-risk, healthy risk in the market as inflation comes down and growth is decent. We are churning in equities. Steady. It's healthy. But later this year she expects cooling in growth and the economy, so what will be the street's threshold of pain.