- Online orders from GameStop are exploding. This activity can be monitored daily by looking at order numbers on online purchase receipts and working out daily run rates.
- There are queues outside physical retail stores and people trying to get to limited stock of new Playstation and XBox machines. The new console cycle is in full swing.
- Try and order a bundled console and game online at GameStop versus Amazon. Different experience.
- Yesterday afternoon, the company announced its Cyberweek Sales promotion. https://www.globenewswire.com/news-release/2020/11/29/2135912/0/en/GameStop-Announces-2020-Cyber-Week-Deals.html
- Having rallied 10% on Friday, the stock is up a further 15% pre-market today.
- Simple question – if GameStop is able to show this amount of on line traction – should it be valued as a challenged physical retailer or an evolving e-commerce play?
- This is the point of its largest shareholder, Ryan Cohen, more online and e-commerce. Can the management go further? Definitely yes, but we still believe, omni channel, in store experiences, gaming competitions, networking, collectibles count but there is definitely the room to rationalise network further.
- If online exploding, at the very least should it not go back to 2016 multiples? Full note is here : https://thecollective.finance/2020/10/gamestop-gme-a-squeeze-to-44-from-14-can-be-justified-fundamentally-100-of-the-shares-are-short-watch-out/
- How do we get to $44? EV / Next Year Revenue of 0.5x versus Best Buy at 0.65x. Highest analyst revenue estimate to January 2022 of $6.5bn.
- 0.5x EV/revenue = enterprise value of $3.25bn. Current Net Debt is $365mn = equity value of $2.9bn. The shares outstanding are 65mn giving a fair value of $44 per share.
- Reminder, $44 is the technical gap in the chart from November 2015.
- You could argue that 0.5x revenue is still too low if e-commerce momentum builds. Stay long, only getting going and the short interest is still astronomical.
Collective Finance Research
Lot’s more to follow….
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