Summary Points:
- Bears are overly pessimistic while the stock price does not reflect any of the positive evidence from management moves.
- Management plan is reasonable with plenty of cushion available. Company on track to keep GameStop in business for many years to come.
- Stock trades at 70% discount to market (lower than 2012 $16 low) with a sustainable 6% dividend yield.
In my opinion, the shorts are overly pessimistic, choosing to look at only the negatives while expecting doomsday to occur quickly. GameStop (NYSE:GME) management is aw
are of the risks of the business and has been taking steps to replenish potential decrease in the video game business with other income streams. Evidence so far shows that they are on the right path. The stock price does not reflect any of this, which presents investors with an opportunity.
The bear case is that GameStop’s business is Blockbuster and the new business is RadioShack, and so GME is doomed. Regarding the old business of games, we see that new video game software and hardware have been in decline but the disruption is not at the same level as in Blockbuster’s case. New and more powerful consoles are still coming out with virtual reality being the next big thing as outlined in this article.
Physical games are still purchased for a wide range of well-known reasons such as game file size, download speeds, sharing among friends, mobility, gift giving, lack of credit cards among kids, and in GME’s case, PowerUP Rewards.
Shared on reddit, thanks
Meri