Opening a thread for GME. This is a turning-point retail game store, with major owners including Ryan Cohen (founder of the online store Chewy) and Michael Burry from The Big Short.
What makes GME interesting is that it is one of the most shorted stocks in the US, and on the other hand, it is one of the most popular stocks on Reddit’s WallStreetBets forum.
For example, in what way is GameStop making a turnaround? What do the key figures look like and how have they developed in recent years? You could try to put a bit more effort into the opening
Retail in the gaming industry is dead. Digital stores took the candy bags, and then COVID came and steamrolled over what was left. Marginally more interesting as an investment than some bankrupt Hertz, but only marginally.
Gamestop used to make money by reselling used physical games (on consoles) back and forth with huge margins. This business has withered as console purchases shifted to digital stores, and on the other hand, large online retailers like Amazon squeezed margins from new games from another direction.
The stock price can certainly fluctuate wildly, especially if it’s heavily shorted, so there can be occasional bounces when short-sellers want out and there’s little supply. But from a fundamental perspective, this company is like investing in a horse-drawn carriage company… time has passed it by. You can wait for a miracle and a turnaround… but I haven’t heard of any dramatic new plans?
I’m a bit puzzled by the stock value, given that the company has ceased operations entirely in several countries and, as a general rule, the digital markets are kicking them where it hurts. Have there really been significant changes to their operating model, or is there just so much market for used console games in the US that this company is staying afloat?
I’d say Gamestop is one of this decade’s Blockbusters at this rate. A walking corpse. Hopefully, no one is investing their own money in this, at least. One way to survive could be to specialize in gaming merchandise and keep one store per city from the current network. It wouldn’t be anywhere near the size of the company now, but at least it wouldn’t be bankrupt.
Ryan Cohen’s idea has been specifically to transform Gamestop:
Into a strongly e-commerce focused player (this transformation has already begun and e-commerce has grown strongly, although it is still small compared to the total revenue).
To sell merchandise and consoles. GME made a very profitable royalty deal with Microsoft for console sales.
To turn stores into meeting places for gamers (tournaments, etc.)
I cannot comment on how likely success is with this strategy. What makes it interesting is that Cohen has previously made a successful large exit with an e-commerce company (Chewy) and that a herd of nearly 2 million WallStreetBets forum members are cheering on this stock with unprecedented fervor. I sold my shares today. The short squeeze happened faster than I could have dreamed, and I got a +100% return from this short hold. We are certainly living in strange times.
The intention is to return as an owner if it dips.
A heroic story related to this stock, where one man is against the shorts and pushes forward, even though the bears are barking in his face: https://www.reddit.com/user/deepfuckingvalue
The stock is at a 5-year high and up +500% in a year, even though the business doesn’t look very bright. It tells a lot about the madness of the stock market.
IB hasn’t had shorts available for a while - there might be a manipulator with a big wallet in the background, squeezing the shorts. If you yourself wanted to buy more shorts from a higher level, they are no longer available. Not exactly the best trading situation IMO.
What is the investment thesis here? Why would I buy from an online store physically and wait a couple of days for mail when I can buy from an online store digitally and start playing immediately? Price would be the only reason, but why could GameStop sell cheaper? Because they would sell used games? But who sells used games when purchased games are increasingly digital? From my own experience, I can tell you that I haven’t bought a physical game in probably two years, and even before that, we steadily moved towards digital. Nowadays, some games (especially smaller budget games, but also, for example, the new Animal Crossing initially) are not even sold physically.
You can laugh at those memes even if you don’t own them.
This reminds me of VHS rental stores that tried to hold out against the rise of streaming (including video) services until the very end by turning into candy stores. To me, this is purely a short-term battle between shorts and a few big bulls—both sides are looking for quick wins before the final demise. This has been a target for traders for quite some time, ever since the sudden surge began.
I think the same thing is happening to movie theaters.
Since you mentioned Animal Crossing, I have to say that it’s also available physically. A friend of mine bought a physical copy at launch, and it still seems to be available at Gigantti, at least. This friend is, of course, more of an exception than the rule. But generally, even the price is no longer a valid reason, at least on PC. On Steam, almost all games are 50-75% off every couple of months.
I recalled that there was no physical release at all at the time of publication, but perhaps it was due to the very limited availability because of the pandemic.
Exactly this on PC. Steam and various sites selling Steam keys (isthereanydeal) sell digital PC games so cheaply that it’s probably impossible to sell used PC games with any profit left. Gamestop, however, seems to focus mainly on selling used console games, as console games don’t have quite the same market dynamics since the marketplace is owned by the console manufacturer and discounts are accordingly.
The stock price has definitely leaned forward quite a bit from its corona lows. As if this business were suddenly riding the crest of some megatrend.
Animal Crossing is, in my opinion, a very good example of this.
As a (former) Switch owner, I have to say that it’s worth getting games physically, unless you’re particularly wealthy. New games usually cost €50-60 (RRP €60) depending on the store.
In the used game market (Tori, FB), new games go for about €45, older ones for about €30-40. In practice, used Switch games don’t lose their value; only a copy bought right at release loses value. I, for one, bought games used, played them, and sold them on. I never even made a loss doing that.
So, used Switch games retain their value relatively well compared to other game consoles. Digitally purchased ones, on the other hand, cannot be sold on. Of course, you don’t have to carry the physical game with you.
Epic short squeeze underway, already hit 43. Hopefully, short sellers had their stop-losses active. This could run even further - not really under the heading, but since there were mentions of shorting.
