![]() Short interest hit 20% of float in May 2022. ( CVNA), another darling of the meme crowd, is a testament to that. High short interest is not necessarily a contraindicator either. The amount is minuscule relative to the fundamentals. The focus has been on the short interest for delivering a rescue. That was powered by dual thrusters of unbridled fiscal stimulus and clueless monetary pumping. The meme crowd still has visions of a 2021 revisit. We give the cash about 5 quarters before it runs out, 8 if we dodge the recession. So if you gave credit for the cash, you were still left with nothing but losses to support the additional $6 billion of market capitalization. GameStop still sports a $6.8 billion market capitalization. Still, cash has dwindled from $1.32 billion to about $860 million. ![]() Thanks to the meme crowd's efforts, the company had issued stock at a very high price and it had a lot of buffer. Over the last 39 weeks, GameStop burnt through $460.4 million in cash. The $2.17 billion estimate for the next quarter, once again, looks decoupled from reality. This is critical as GameStop will likely drop its margins substantially to clear this in a period of weak holiday sales. Inventories have bloated up and you can see in terms of sales, they are way higher than they were last two years at the same point. A lot rests even on that quarter to give the company time to survive. GameStop is currently servicing the last hardware cycle in the gaming business and sales drop should really accelerate once we go past the fourth quarter (ending in January 2023). In fact, we doubt that even the low end of $5.68 billion will come to pass. OutlookĬonsensus remains too optimistic on sales for the next year in our opinion. ![]() The conference call did not have a single question from anyone and this fits with our view that people are throwing in the towel. We anticipate CapEx will remain at similar or reduced levels now that the Company has largely completed its period of heavy investment. The physical store turnaround has pretty much been abandoned.Ĭapital expenditures for the quarter were $13 million, up $0.5 million from last year's third quarter. Today, we're in the process of aligning corporate costs through our go-forward needs after completing the majority of necessary upgrades to our systems, fulfillment capabilities and overall foundation. This follows two bad quarters where GameStop could not get any traction despite hype being placed on its turnaround strategy.Ĭommentary from management suggested that they were hunkering down and hoping for cost control to work its magic. Nonetheless, there were some estimates out there for the quarter and GameStop missed them by a mile with revenues coming in $160 million below estimates. ![]() This makes sense as there was little to gain by analyzing pure fundamentals only to see the stock move up 50-fold on the back of the logic that "others are short". The number of analysts covering this stock has dwindled over time with only the dynamic duo offering views for 2022. We look at the recently released results and tell you why this headed to the low single digits. But things have broken down and anyone who heeded our warning to stay away is not looking too shabby. That did not work out, as the stock continued to levitate for some time after that. That was a small calculated gamble with a limited risk and a defined loss. While we have chosen the $40-$20 ratio spread as we have zero desire to be long GME shares at absolutely any price, this strategy can be tailored to your individual views about the outcome. Our short technique has very limited risk and good potential if the shares dive as expected. Of course having seen how bad the short side case could go, we decided to play it safe with ratio spreads. One of the worst fundamentals coupled with extreme euphoria. ( NYSE: GME), we called the situation for what it was. ![]()
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