Seeking Alpha

GameStop defended after share meltdown

  • GameStop (GME +0.7%) is defended at Sterne Agee with a reiterated Buy rating on the firm's belief that new consoles will reach the 50M level by 2015 to support the company's business model.
  • The dismantling of shares of GameStop yesterday was based on the premise that although Xbox One and PlayStation 4 gaming consoles sold well, consumers are buying fewer older-model games than anticipated in a trend that cuts deeply into profit margins.
  • Sterne takes the long view that the new console cycle still sets up GameStop well as gamers reload and sees the sell-off as bringing GME's valuation back to an attractive entry point.
  • The investment firm did reign in its lofty price target a bit, reducing it to $52 from $58.
Comments (1)
  • MangDynasty
    , contributor
    Comments (29) | Send Message
     
    The dismantling of shares of GameStop yesterday was ACTUALLY due to the stock's price being obviously way too high for multiple reasons. Such as exuberant holiday expectations not being met, a terrifying increase in stock price all throughout 2013 that was very unjustified (just look back at what happened in the previous console cycle in '07-'08), management's inability to understand consumer trends, relying heavily on forecasts based on biased GameStop PowerUp subscriber data, the obvious move toward increased digital sales which won't be made by GameStop, etc.

     

    I had never seen a more obvious short opportunity -- and I'm clearly not alone, as GME is one of the most shorted stocks out there.

     

    I foolishly forgot that their earnings date was this early in the season so I didn't buy my puts in time. Realistic price target = $25 a share.

     

    My condolences to those who were long GME.
    15 Jan 2014, 11:18 AM Reply Like
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