What Is GameStop Actually Worth?

seekingalpha08-22

Today, we're exploring what 'Fair Value' for GME shares could be.Given the declining sales figures, persistent headwinds, and patently absurd valuation, we're staying far away from this stock.In an ...

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dr_balls
08-24
dr_balls
Profitable business 4 bil cash Minimal debt I like the stock.

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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nWhat Is GameStop Actually Worth?\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-08-22 02:53 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4716275-what-is-gamestop-actually-worth>seekingalpha</a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\nToday, we're exploring what 'Fair Value' for GME shares could be.Given the declining sales figures, persistent headwinds, and patently absurd valuation, we're staying far away from this stock.In an ...\n\n<a href=\"https://seekingalpha.com/article/4716275-what-is-gamestop-actually-worth\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4585","symbol_name":"ETF&股票定投概念","start_time":0,"source_url":"https://seekingalpha.com/article/4716275-what-is-gamestop-actually-worth","article_id":"2461877943","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1340091859/image_1340091859.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2461877943","pubTimestamp":1724266399,"columns":[],"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Today, we're exploring what 'Fair Value' for GME shares could be.Given the declining sales figures, persistent headwinds, and patently absurd valuation, we're staying far away from this stock.In an op","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4585":"ETF&股票定投概念","BK4588":"碎股","BK4076":"电脑与电子产品零售","BK4577":"网络游戏","GME":"游戏驿站","BK4547":"WSB热门概念"},"translate_title":"游戏驿站的实际价值是多少？","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"GME":1},"content_text":"Today, we're exploring what 'Fair Value' for GME shares could be.Given the declining sales figures, persistent headwinds, and patently absurd valuation, we're staying far away from this stock.In an optimistic scenario, we've pegged Fair Value at around $6.5 per share, which is 72% beneath the current stock price.We rate GME a 'Strong Sell'. jetcityimage Most of the time when we review a company, we start with the premise that the market is probably somewhat correct, if not entirely correct, about a stock's value. We often think that the market is wrong upon further inspection, but it typically pays to at least get a sense of what investors are thinking before starting your own analysis. Then, you can ferret out the degree to which you think you have an edge, which can then be expressed in a position. In the case of GameStop (NYSE:GME), the reverse is probably true. As a bona fide meme stock, the company doesn't trade on fundamentals, and so there's really no reason to take a look at 'market expectations' because they're quite difficult to parse. In May, Roaring Kitty, the meme stock 'hero' from 2021, showed that he had a massive amount of capital invested in the name, and the stock flew up more than 500% over a few days from trough to peak: TradingView In situations like this, we think it's a lot easier to work backwards from the ground up to get a sense of where the stock could be headed over the long term. Today, we'll be doing just that. In this article, we'll take a look at GME's business, trends, and assets to determine what we think the company is worth on a fundamental basis. Then, we'll issue our rating. In case you're short on time, we think GME is a 'Strong Sell' - a speculative plaything for shorter term traders that has no position in a serious portfolio. If you want to see how we came to that conclusion, then read on. GME's Financials If you're just coming into the picture now for the first time in the last few years, here are the high-level stats to be aware of. GME's market cap is around $9.5 billion. Over the last twelve months, the company did $4.9 billion in revenue, $1.2 billion in gross profit, and $24 million ($0.024 billion) in net income. This is a net margin of 0.51%, which puts the company slightly in the black. For context, these financial results come within the picture of generally falling revenue, worsening operating income, and plummeting EBIT: Revenue (Seeking Alpha) Operating Income (Seeking Alpha) EBIT (Seeking Alpha) To some, the incremental improvements over the last year or so to GME's bottom line have served as 'proof' of the company's turnaround, but cash from operations remains firmly negative as net losses around payables and inventory keep cropping up: Seeking Alpha To be clear, we do want to give management some credit for shoring up the balance sheet, cutting costs, and getting the company into fighting shape looking forward. Since 2021, the company has been focused on a few key prongs, all of which have been focused on making the company investible: • Establish Omnichannel Retail Excellence - We aim to be the leading destination for games and entertainment products through our stores and ecommerce platforms. To accomplish this, we are taking steps to ensure we are a fast and convenient solution for our customers. This includes increased product availability across all channels, faster fulfillment through ship from store offerings, and a further improved customer service experience. • Achieve Profitability - During fiscal 2023, we continued to optimize our cost structure to align with our current and anticipated future needs. We will continue to focus on cost containment as we look to operate with increased efficiency. • Leverage Brand Equity to Support Growth - GameStop has many strengths and assets, including strong household brand recognition and a significant store network. Taken together, there have been some improvements made to GME from an asset allocation standpoint. That said, there are still huge headwinds that shareholders should be ready to contend with. The main cause of GME's revenue decline has been an increase in digital game purchases directly on consoles and PCs, which is a trend that we don't see reversing anytime soon. In 2023, only 17% of console gaming revenue was physical, as opposed to digital: TweakTown | NewZoo In 2022, just one year earlier, the number was 28%. To us, these megatrends in gaming represent terminal velocity when it comes to physical sales. We will have an all-digital future in gaming - it's hard to see things going any other direction. To underscore this fact, console manufacturers are already producing consoles without disc slots: Quora To be fair to GME, the company does sell adjacent products to games as well, including software keys and collectibles: 10Q Plus, gamers need to go somewhere to buy consoles, controllers, and other equipment, which means that we don't think all of GME's revenue sources are going to zero. However, GME's cost structure is going to have a tough time coping with the decline in sales if and when games begin to make up a smaller and smaller portion of what people actually buy at GameStop. It's already happening: [We had a] 29.1%, decline in the sale of new software, a $220.5 million, or 30.4%, decline in the sale of hardware and accessories, and a $36.2 million, or 20.9%, decline in the sale of collectibles. It's very hard to cut your way to profitability when sales are dropping this fast: Seeking Alpha Slashing SG&A simply can't keep up with market forces that are beyond GME's control. On top of that, all of the aforementioned moves taken to improve the company's position thus far have come at great expense to shareholders, as retained earnings continue to plunge into the red and common equity value declines: Seeking Alpha Long story short, we think the company is in better shape than it was in 2021, but it's very hard to imagine a scenario where GME can get revenue moving in the right direction and keep the cost structure profitable. We think GME will stay in business for the foreseeable future and could even be profitable going forward given the improved balance sheet. However, doing so would likely mean that the company's revenue would be a fraction of where it is today. This brings us to the valuation. GME's Valuation Right now, as we mentioned, GME's market cap is roughly $9.5 billion. But what is the company actually worth? Well, if you assume that sales will continue declining until the company sells an even split of collectibles, consoles, and software keys at some point in the next 5 years, then we're looking at a revenue base of roughly $1.2 - $1.5 billion per year. On this, if management can continue making progress on the cost structure, then we could see 10% net margins over time (which is a tad generous given the headwinds), which would result in $120 - $150 million per annum in profit. This would be an optimal outcome for shareholders, in our view, and assumes solid management execution to get to this point. If you slap on a 12x P/E - which is a discount to the sector's average 17x P/E due to GME's lower growth profile - then you end up with a potential market cap somewhere in the $1.4 - $1.8 billion range. Tack on the additional $1 billion in cash, and you end up with $2.4 - $2.8 billion market cap as a Fair Value for GME sometime over the next few years. Remember, this assumption includes continued declines in sales to a 'baseline' (which might not exist) and assumes 10% net margins (which may be impossible to generate). Taken together, we'd argue this is a rosy projection. Right now, GME is trading at a $9.5 billion market cap, which is significantly higher than this value. If GME were to fall tomorrow to this estimate, investors would lose 72% overnight, and shares would settle around the $6.5 mark. The key thing here is that GME's sales are still substantial, which means that it's easy for investors to look at the company and think the following: 'Well, if sales can stay flat and profitability improves, then the multiple doesn't look so crazy'. However, as sales continue to drop (as they have been doing), then the $9.5 billion market cap makes absolutely no sense from a fundamental standpoint. Long story short, given the discrepancy between our projection and the company's current market cap, it's hard to argue that GME is anything other than a 'Strong Sell'. Risks That said, we don't think you should be shorting the stock. As we mentioned at the start of this article, GME doesn't trade off of fundamental value in the short term, which means that the stock is prone to serious, prolonged, nasty spikes which are sure to wreck the average short seller. As Manuel Paul Dipold's recent article summarized in the title: \"GameStop: Too Risky To Buy, Too Risky To Short\". This seems about right, in our view. We've outlined the many risks to staying long at this price, but going short simply doesn't make a lot of sense either. Summary All in all, we think the best path for investors interested in GME is simply to stay away. It's too volatile to consider as a short play, and the fundamentals simply don't back a long position. Thus, our 'Strong Sell' rating. Stay safe out there!","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"-1","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[{"id":341682456637568,"gmtCreate":1724440414110,"gmtModify":1724440418942,"author":{"id":"4146709871484912","authorId":"4146709871484912","name":"dr_balls","avatar":"https://community-static.tradeup.com/news/default-avatar.jpg","vip":1,"crmLevel":1,"crmLevelSwitch":0,"idStr":"4146709871484912","authorIdStr":"4146709871484912"},"htmlText":"Profitable business&nbsp; 4 bil cash Minimal debt I like the stock.&nbsp;","listText":"Profitable business&nbsp; 4 bil cash Minimal debt I like the stock.&nbsp;","text":"Profitable business 4 bil cash Minimal debt I like the stock.","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/341682456637568","repostId":2461877943,"repostType":2,"repost":{"id":"2461877943","kind":"highlight","pubTimestamp":1724266399,"share":"https://ttm.financial/m/news/2461877943?lang=&edition=fundamental","pubTime":"2024-08-22 02:53","market":"us","language":"en","title":"What Is GameStop Actually Worth?","url":"https://stock-news.laohu8.com/highlight/detail?id=2461877943","media":"seekingalpha","summary":"Today, we're exploring what 'Fair Value' for GME shares could be.Given the declining sales figures, persistent headwinds, and patently absurd valuation, we're staying far away from this stock.In an op","content":"<html><body><ul><li>Today, we're exploring what 'Fair Value' for GME shares could be.</li><li>Given the declining sales figures, persistent headwinds, and patently absurd valuation, we're staying far away from this stock.</li><li>In an optimistic scenario, we've pegged Fair Value at around $6.5 per share, which is 72% beneath the current stock price.</li><li>We rate GME a 'Strong Sell'.</li></ul><figure><picture> <img fetchpriority=\"high\" height=\"1024px\" sizes=\"(max-width: 768px) calc(100vw - 36px), (max-width: 1024px) calc(100vw - 132px), (max-width: 1200px) calc(66.6vw - 72px), 600px\" src=\"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1340091859/image_1340091859.jpg?io=getty-c-w750\" srcset=\"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1340091859/image_1340091859.jpg?io=getty-c-w1536 1536w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1340091859/image_1340091859.jpg?io=getty-c-w1280 1280w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1340091859/image_1340091859.jpg?io=getty-c-w1080 1080w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1340091859/image_1340091859.jpg?io=getty-c-w750 750w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1340091859/image_1340091859.jpg?io=getty-c-w640 640w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1340091859/image_1340091859.jpg?io=getty-c-w480 480w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1340091859/image_1340091859.jpg?io=getty-c-w320 320w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1340091859/image_1340091859.jpg?io=getty-c-w240 240w\" width=\"1536px\"/> </picture><figcaption> jetcityimage</figcaption></figure> Most of the time when we review a company, we start with the premise that the market is probably somewhat correct, if not entirely correct, about a stock's value. We often think that the market is wrong upon further inspection, but it typically pays to at least get a sense of what investors are thinking before starting your own analysis. Then, you can ferret out the degree to which you think you have an edge, which can then be expressed in a position. In the case of GameStop (NYSE:GME), the reverse is probably true. As a bona fide meme stock, the company doesn't trade on fundamentals, and so there's really no reason to take a look at 'market expectations' because they're quite difficult to parse. In May, Roaring Kitty, the meme stock 'hero' from 2021, showed that he had a massive amount of capital invested in the name, and the stock flew up more than 500% over a few days from trough to peak: <figure contenteditable=\"false\"><picture> <img contenteditable=\"false\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2024/8/19/51481993-17240937495659525.png\"/> </picture><figcaption>TradingView</figcaption></figure> In situations like this, we think it's a lot easier to work backwards from the ground up to get a sense of where the stock could be headed over the long term. Today, we'll be doing just that. In this article, we'll take a look at GME's business, trends, and assets to determine what we think the company is worth on a fundamental basis. Then, we'll issue our rating. In case you're short on time, we think GME is a 'Strong Sell' - a speculative plaything for shorter term traders that has no position in a serious portfolio. If you want to see how we came to that conclusion, then read on. <h2>GME's Financials</h2> If you're just coming into the picture now for the first time in the last few years, here are the high-level stats to be aware of. GME's market cap is around $9.5 billion. Over the last twelve months, the company did $4.9 billion in revenue, $1.2 billion in gross profit, and $24 million ($0.024 billion) in net income. This is a net margin of 0.51%, which puts the company slightly in the black. For context, these financial results come within the picture of generally falling revenue, worsening operating income, and plummeting EBIT: <figure contenteditable=\"false\"><picture> <img contenteditable=\"false\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2024/8/19/51481993-17240945219148483.png\"/> </picture><figcaption>Revenue (Seeking Alpha)</figcaption></figure><figure contenteditable=\"false\"><picture> <img contenteditable=\"false\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2024/8/19/51481993-1724094583444458.png\"/> </picture><figcaption>Operating Income (Seeking Alpha)</figcaption></figure><figure contenteditable=\"false\"><picture> <img contenteditable=\"false\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2024/8/19/51481993-17240946123812904.png\"/> </picture><figcaption>EBIT (Seeking Alpha)</figcaption></figure> To some, the incremental improvements over the last year or so to GME's bottom line have served as 'proof' of the company's turnaround, but cash from operations remains firmly negative as net losses around payables and inventory keep cropping up: <figure contenteditable=\"false\"><picture> <img contenteditable=\"false\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2024/8/19/51481993-17240947017725484.png\"/> </picture><figcaption>Seeking Alpha</figcaption></figure> To be clear, we do want to give management some credit for shoring up the balance sheet, cutting costs, and getting the company into fighting shape looking forward. Since 2021, the company has been focused on a few key prongs, all of which have been focused on making the company investible: <blockquote> • Establish Omnichannel Retail Excellence - We aim to be the leading destination for games and entertainment products through our stores and ecommerce platforms. To accomplish this, we are taking steps to ensure we are a fast and convenient solution for our customers. This includes increased product availability across all channels, faster fulfillment through ship from store offerings, and a further improved customer service experience. • Achieve Profitability - During fiscal 2023, we continued to optimize our cost structure to align with our current and anticipated future needs. We will continue to focus on cost containment as we look to operate with increased efficiency. • Leverage Brand Equity to Support Growth - GameStop has many strengths and assets, including strong household brand recognition and a significant store network. </blockquote> Taken together, there have been some improvements made to GME from an asset allocation standpoint. That said, there are still huge headwinds that shareholders should be ready to contend with. The main cause of GME's revenue decline has been an increase in digital game purchases directly on consoles and PCs, which is a trend that we don't see reversing anytime soon. In 2023, only 17% of console gaming revenue was physical, as opposed to digital: <figure contenteditable=\"false\"><picture> <img contenteditable=\"false\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2024/8/19/51481993-17241007292095253.png\"/> </picture><figcaption>TweakTown | NewZoo</figcaption></figure> In 2022, just one year earlier, the number was 28%. To us, these megatrends in gaming represent terminal velocity when it comes to physical sales. We will have an all-digital future in gaming - it's hard to see things going any other direction. To underscore this fact, console manufacturers are already producing consoles without disc slots: <figure contenteditable=\"false\"><picture> <img contenteditable=\"false\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2024/8/19/saupload_main-qimg-5c7da1cf2145b1b5b8cce2015393ed73-lq.jpeg\"/> </picture><figcaption>Quora</figcaption></figure> To be fair to GME, the company does sell adjacent products to games as well, including software keys and collectibles: <figure contenteditable=\"false\"><picture> <img contenteditable=\"false\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2024/8/19/51481993-17241010867839038.png\"/> </picture><figcaption>10Q</figcaption></figure> Plus, gamers need to go somewhere to buy consoles, controllers, and other equipment, which means that we don't think all of GME's revenue sources are going to zero. However, GME's cost structure is going to have a tough time coping with the decline in sales if and when games begin to make up a smaller and smaller portion of what people actually buy at GameStop. It's already happening: <blockquote>[We had a] 29.1%, decline in the sale of new software, a $220.5 million, or 30.4%, decline in the sale of hardware and accessories, and a $36.2 million, or 20.9%, decline in the sale of collectibles.</blockquote> It's very hard to cut your way to profitability when sales are dropping this fast: <figure contenteditable=\"false\"><picture> <img contenteditable=\"false\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2024/8/19/51481993-1724101712231091.png\"/> </picture><figcaption>Seeking Alpha</figcaption></figure> Slashing SG&amp;A simply can't keep up with market forces that are beyond GME's control. On top of that, all of the aforementioned moves taken to improve the company's position thus far have come at great expense to shareholders, as retained earnings continue to plunge into the red and common equity value declines: <figure contenteditable=\"false\"><picture> <img contenteditable=\"false\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2024/8/19/51481993-17241003428534157.png\"/> </picture><figcaption>Seeking Alpha</figcaption></figure> Long story short, we think the company is in better shape than it was in 2021, but it's very hard to imagine a scenario where GME can get revenue moving in the right direction and keep the cost structure profitable. We think GME will stay in business for the foreseeable future and could even be profitable going forward given the improved balance sheet. However, doing so would likely mean that the company's revenue would be a fraction of where it is today. This brings us to the valuation. <h2>GME's Valuation</h2> Right now, as we mentioned, GME's market cap is roughly $9.5 billion. But what is the company actually worth? Well, if you assume that sales will continue declining until the company sells an even split of collectibles, consoles, and software keys at some point in the next 5 years, then we're looking at a revenue base of roughly $1.2 - $1.5 billion per year. On this, if management can continue making progress on the cost structure, then we could see 10% net margins over time (which is a tad generous given the headwinds), which would result in $120 - $150 million per annum in profit. This would be an optimal outcome for shareholders, in our view, and assumes solid management execution to get to this point. If you slap on a 12x P/E - which is a discount to the sector's average 17x P/E due to GME's lower growth profile - then you end up with a potential market cap somewhere in the $1.4 - $1.8 billion range. Tack on the additional $1 billion in cash, and you end up with $2.4 - $2.8 billion market cap as a Fair Value for GME sometime over the next few years. Remember, this assumption includes continued declines in sales to a 'baseline' (which might not exist) and assumes 10% net margins (which may be impossible to generate). Taken together, we'd argue this is a rosy projection. Right now, GME is trading at a $9.5 billion market cap, which is significantly higher than this value. If GME were to fall tomorrow to this estimate, investors would lose 72% overnight, and shares would settle around the $6.5 mark. The key thing here is that GME's sales are still substantial, which means that it's easy for investors to look at the company and think the following: <blockquote>'Well, if sales can stay flat and profitability improves, then the multiple doesn't look so crazy'.</blockquote> However, as sales continue to drop (as they have been doing), then the $9.5 billion market cap makes absolutely no sense from a fundamental standpoint. Long story short, given the discrepancy between our projection and the company's current market cap, it's hard to argue that GME is anything other than a 'Strong Sell'. <h2>Risks</h2> That said, we don't think you should be shorting the stock. As we mentioned at the start of this article, GME doesn't trade off of fundamental value in the short term, which means that the stock is prone to serious, prolonged, nasty spikes which are sure to wreck the average short seller. As Manuel Paul Dipold's recent article summarized in the title: \"GameStop: Too Risky To Buy, Too Risky To Short\". This seems about right, in our view. We've outlined the many risks to staying long at this price, but going short simply doesn't make a lot of sense either. <h2>Summary</h2> All in all, we think the best path for investors interested in GME is simply to stay away. It's too volatile to consider as a short play, and the fundamentals simply don't back a long position. Thus, our 'Strong Sell' rating. <div></div> Stay safe out there!</body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>What Is GameStop Actually Worth?</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nWhat Is GameStop Actually Worth?\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-08-22 02:53 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4716275-what-is-gamestop-actually-worth>seekingalpha</a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\nToday, we're exploring what 'Fair Value' for GME shares could be.Given the declining sales figures, persistent headwinds, and patently absurd valuation, we're staying far away from this stock.In an ...\n\n<a href=\"https://seekingalpha.com/article/4716275-what-is-gamestop-actually-worth\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1340091859/image_1340091859.jpg","relate_stocks":{"BK4585":"ETF&股票定投概念","BK4588":"碎股","BK4076":"电脑与电子产品零售","BK4577":"网络游戏","GME":"游戏驿站","BK4547":"WSB热门概念"},"source_url":"https://seekingalpha.com/article/4716275-what-is-gamestop-actually-worth","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"2461877943","content_text":"Today, we're exploring what 'Fair Value' for GME shares could be.Given the declining sales figures, persistent headwinds, and patently absurd valuation, we're staying far away from this stock.In an optimistic scenario, we've pegged Fair Value at around $6.5 per share, which is 72% beneath the current stock price.We rate GME a 'Strong Sell'. jetcityimage Most of the time when we review a company, we start with the premise that the market is probably somewhat correct, if not entirely correct, about a stock's value. We often think that the market is wrong upon further inspection, but it typically pays to at least get a sense of what investors are thinking before starting your own analysis. Then, you can ferret out the degree to which you think you have an edge, which can then be expressed in a position. In the case of GameStop (NYSE:GME), the reverse is probably true. As a bona fide meme stock, the company doesn't trade on fundamentals, and so there's really no reason to take a look at 'market expectations' because they're quite difficult to parse. In May, Roaring Kitty, the meme stock 'hero' from 2021, showed that he had a massive amount of capital invested in the name, and the stock flew up more than 500% over a few days from trough to peak: TradingView In situations like this, we think it's a lot easier to work backwards from the ground up to get a sense of where the stock could be headed over the long term. Today, we'll be doing just that. In this article, we'll take a look at GME's business, trends, and assets to determine what we think the company is worth on a fundamental basis. Then, we'll issue our rating. In case you're short on time, we think GME is a 'Strong Sell' - a speculative plaything for shorter term traders that has no position in a serious portfolio. If you want to see how we came to that conclusion, then read on. GME's Financials If you're just coming into the picture now for the first time in the last few years, here are the high-level stats to be aware of. GME's market cap is around $9.5 billion. Over the last twelve months, the company did $4.9 billion in revenue, $1.2 billion in gross profit, and $24 million ($0.024 billion) in net income. This is a net margin of 0.51%, which puts the company slightly in the black. For context, these financial results come within the picture of generally falling revenue, worsening operating income, and plummeting EBIT: Revenue (Seeking Alpha) Operating Income (Seeking Alpha) EBIT (Seeking Alpha) To some, the incremental improvements over the last year or so to GME's bottom line have served as 'proof' of the company's turnaround, but cash from operations remains firmly negative as net losses around payables and inventory keep cropping up: Seeking Alpha To be clear, we do want to give management some credit for shoring up the balance sheet, cutting costs, and getting the company into fighting shape looking forward. Since 2021, the company has been focused on a few key prongs, all of which have been focused on making the company investible: • Establish Omnichannel Retail Excellence - We aim to be the leading destination for games and entertainment products through our stores and ecommerce platforms. To accomplish this, we are taking steps to ensure we are a fast and convenient solution for our customers. This includes increased product availability across all channels, faster fulfillment through ship from store offerings, and a further improved customer service experience. • Achieve Profitability - During fiscal 2023, we continued to optimize our cost structure to align with our current and anticipated future needs. We will continue to focus on cost containment as we look to operate with increased efficiency. • Leverage Brand Equity to Support Growth - GameStop has many strengths and assets, including strong household brand recognition and a significant store network. Taken together, there have been some improvements made to GME from an asset allocation standpoint. That said, there are still huge headwinds that shareholders should be ready to contend with. The main cause of GME's revenue decline has been an increase in digital game purchases directly on consoles and PCs, which is a trend that we don't see reversing anytime soon. In 2023, only 17% of console gaming revenue was physical, as opposed to digital: TweakTown | NewZoo In 2022, just one year earlier, the number was 28%. To us, these megatrends in gaming represent terminal velocity when it comes to physical sales. We will have an all-digital future in gaming - it's hard to see things going any other direction. To underscore this fact, console manufacturers are already producing consoles without disc slots: Quora To be fair to GME, the company does sell adjacent products to games as well, including software keys and collectibles: 10Q Plus, gamers need to go somewhere to buy consoles, controllers, and other equipment, which means that we don't think all of GME's revenue sources are going to zero. However, GME's cost structure is going to have a tough time coping with the decline in sales if and when games begin to make up a smaller and smaller portion of what people actually buy at GameStop. It's already happening: [We had a] 29.1%, decline in the sale of new software, a $220.5 million, or 30.4%, decline in the sale of hardware and accessories, and a $36.2 million, or 20.9%, decline in the sale of collectibles. It's very hard to cut your way to profitability when sales are dropping this fast: Seeking Alpha Slashing SG&A simply can't keep up with market forces that are beyond GME's control. On top of that, all of the aforementioned moves taken to improve the company's position thus far have come at great expense to shareholders, as retained earnings continue to plunge into the red and common equity value declines: Seeking Alpha Long story short, we think the company is in better shape than it was in 2021, but it's very hard to imagine a scenario where GME can get revenue moving in the right direction and keep the cost structure profitable. We think GME will stay in business for the foreseeable future and could even be profitable going forward given the improved balance sheet. However, doing so would likely mean that the company's revenue would be a fraction of where it is today. This brings us to the valuation. GME's Valuation Right now, as we mentioned, GME's market cap is roughly $9.5 billion. But what is the company actually worth? Well, if you assume that sales will continue declining until the company sells an even split of collectibles, consoles, and software keys at some point in the next 5 years, then we're looking at a revenue base of roughly $1.2 - $1.5 billion per year. On this, if management can continue making progress on the cost structure, then we could see 10% net margins over time (which is a tad generous given the headwinds), which would result in $120 - $150 million per annum in profit. This would be an optimal outcome for shareholders, in our view, and assumes solid management execution to get to this point. If you slap on a 12x P/E - which is a discount to the sector's average 17x P/E due to GME's lower growth profile - then you end up with a potential market cap somewhere in the $1.4 - $1.8 billion range. Tack on the additional $1 billion in cash, and you end up with $2.4 - $2.8 billion market cap as a Fair Value for GME sometime over the next few years. Remember, this assumption includes continued declines in sales to a 'baseline' (which might not exist) and assumes 10% net margins (which may be impossible to generate). Taken together, we'd argue this is a rosy projection. Right now, GME is trading at a $9.5 billion market cap, which is significantly higher than this value. If GME were to fall tomorrow to this estimate, investors would lose 72% overnight, and shares would settle around the $6.5 mark. The key thing here is that GME's sales are still substantial, which means that it's easy for investors to look at the company and think the following: 'Well, if sales can stay flat and profitability improves, then the multiple doesn't look so crazy'. However, as sales continue to drop (as they have been doing), then the $9.5 billion market cap makes absolutely no sense from a fundamental standpoint. Long story short, given the discrepancy between our projection and the company's current market cap, it's hard to argue that GME is anything other than a 'Strong Sell'. Risks That said, we don't think you should be shorting the stock. As we mentioned at the start of this article, GME doesn't trade off of fundamental value in the short term, which means that the stock is prone to serious, prolonged, nasty spikes which are sure to wreck the average short seller. As Manuel Paul Dipold's recent article summarized in the title: \"GameStop: Too Risky To Buy, Too Risky To Short\". This seems about right, in our view. We've outlined the many risks to staying long at this price, but going short simply doesn't make a lot of sense either. Summary All in all, we think the best path for investors interested in GME is simply to stay away. It's too volatile to consider as a short play, and the fundamentals simply don't back a long position. Thus, our 'Strong Sell' rating. Stay safe out there!","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"isCommentEnd":false,"newsSizeData":{"likeSize":1,"commentSize":1,"repostSize":1,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2461877943"}