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Dit is nog niet the big squeeze. Bij een scherpe terugval, stap ik weer in.
The final part in the GameStop Short Squeeze Series.
A comprehensive situation breakdown.
Thoughtfully gambling on the potential short squeeze.
This is the third and final part of my three part series: GameStop Short Squeeze. See Part I & Part II here. This will also be the most detailed of the three parts given my belief that after earnings next week, this trade will no longer exist.
"Gases tend to become trapped at high pressure within the magma. When the magma approaches the surface of the Earth, the rapid off-loading of overlying material causes the trapped gases to decompress rapidly, thus triggering explosive destruction of the magma and spreading volcanic ash over wide areas."(Source: Wikipedia)
The quote above is a perfect summary of the situation we find ourselves in. We've witnessed the magma slowly approaching the surface of the Earth. Next week, I believe we will witness a rapid and violent decompression that will result in the beginning of a historic short squeeze.
From 2016-to-Present, GameStop's (NYSE:GME) business has been in secular decline due to an industry transition to digital retail. Similar to Blockbuster, GameStop has been slow to respond to the ongoing shift in consumer behavior. Additionally, GameStop has faced numerous internal challenges including, but not limited to: Poor public perception, low morale among employees, weak management, expensive and ill-thought out M&A, low reinvestment, an expensive dividend (no longer in-place), declining revenues at the end of a lengthy console cycle, poor marketing efforts, a poorly designed website (personal opinion), rapid management changeover, and finally a lack of a comprehensive go-forward business strategy.
Things are looking bleak, and wise short-sellers have capitalized on this fact over the past five years - evidenced by GameStop's declining share price.
Over the past 5-years, Short-sellers have piled into this trade, emboldened by 5-years of consistent returns. This precarious situation has lead to GameStop becoming one of the most shorted stocks ever, as evidenced by the graphic below.
The Bullish Case
GameStop is a case study in negative bias. GameStop executed its debt exchange flawlessly. The company has made improvements in its vendor relationships, and is poised to generate meaningful free cash flow during the upcoming console cycle. They can expand high margin digital sales, close less profitable stores (reducing LT debt from leases), and paydown debt with excess cash on hand. They have the ability to buyback shares, and they don't pay a dividend allowing them to reinvest in the business. They also hold a unique position within the thriving video game industry, and I believe they could be a genuine buyout target for a larger digital retailer looking for brick and mortar exposure.
Risks & Challenges to GameStop
GameStop could go to zero over the next 3-5 years. Management could fail to turn the business around, destroying all remaining equity value in the business. The transition to digital retail could accelerate dramatically, especially in a COVID-19 world where people do not want to frequent physical retailers. GameStop faces numerous uphill battles in the future. For example, how will they generate cash flow post-console cycle? It is unclear that they have learned how to sustain profitability during off cycle years, and the console cycle may not be as beneficial as they expect it to be. If they do not clearly lay out a path forward and a strategic vision, I believe they will falter.
It is not certain that GameStop will stage a successful turnaround; however, I believe they have the tools and leadership to potentially make it happen.
Risks of Using OTM Call Options to Play a Short Squeeze
Option values are highly sensitive to volatility, the underlying price, and time. I am specifically using January dated calls because they provide ample time for my thesis to play out. For call holders (including myself), please be cautious of buying short dated options due to time decay. The risk of options expiring worthless is quite real and could result in a total loss of investment. This is not a conservative play, by any means. I still believe OTM call options remain the superior way to play a short squeeze because they benefit from what I expect to be an increase in volatility and share price.
Ryan Cohen's GameStop Investment
In multiple 13D filings, Ryan Cohen (in conjunction with RC Ventures) disclosed the purchase this month of 6.2 million shares at prices ranging from $4.60 to $6.73 a share. As of today, Cohen owns 9.6% of GameStop's shares outstanding.
Cohen said in the filing that he acquired the GameStop stake based on a view that the stock was “undervalued and represented an attractive investment opportunity.” The filing said he could buy more shares, and that he could make proposals on changes in the company’s ownership structure or strategy.(Source: SEC Filings)
bron: https://seekingalpha.com/article/437259 ... ent=link-2
- Berichten: 348
- Lid geworden op: 01 dec 2013 17:00
- waarderingen: 50
Sep. 8, 2020 5:35 PM ET|About: GameStop Corp. (GME)|By: Akanksha Bakshi, SA News Editor
GameStop (NYSE:GME) is scheduled to announce Q2 earnings results on Wednesday, September 9th, after market close.
The consensus EPS Estimate is -$1.14 and the consensus Revenue Estimate is $1.02B (-20.9% Y/Y).
Analysts expect comparable sale of -21.5%.
Over the last 2 years, GME has beaten EPS estimates 63% of the time and has beaten revenue estimates 25% of the time.
Over the last 3 months, EPS estimates have seen 2 upward revisions and 5 downward. Revenue estimates have seen 5 upward revisions and 1 downward.
bron: https://seekingalpha.com/news/3612222-g ... ent=link-3
- Forum verkenner
- Berichten: 85
- Lid geworden op: 14 sep 2012 12:49
- waarderingen: 7
Looks like a Buy Program kicks in every 7 days (1hour chart)
Buying more GME each time.
Next 7 day is tomorrow Sept29
Is this Ryan?
Having watched their shares fall 90% in the six years prior to 2020, and then watching them slip under the $3 mark in April, investors in GameStop (NYSE: GME) must have surely been expecting to see their stock trade at $0.20 before it traded at $20 again.
But the stock market works in mysterious ways and having leveled off throughout the summer, shares of the Texas-based video game retailer have logged a blistering run over the past four months. A 4% jump in Monday’s session had them closing up more than 400% since August and 75% in the past two weeks alone. That’s a phenomenal amount of momentum to take with them into 2021 and there’s plenty of steam left in the engine.
Change Of Direction
Things were already starting to heat up in September before news broke in October of a surprise commercial agreement with Microsoft (NASDAQ: MSFT). Any time a gamer buys digital-only products on an Xbox that was purchased in a GameStop store, GameStop will get a cut. This kind of partnership bodes well for the company’s efforts to drive their digital revenue as they continue to pivot towards that channel.
At the time, short interest in GameStop shares was upwards of 100% so this news unsurprisingly lit a fire under the stock as the shorts rushed to buy shares to exit their positions. But unlike other short squeezes, the run didn’t stop there. Richard Mashaal's Senvest Management announced the same month that they’d picked up a 5.5% stake in the company and highlighted the long term recovery potential they saw and this only served to add fuel to the fire.
Then, earlier this month, Wedbush was out with a 100% increase to their price target for GameStop shares. Analyst Michael Pachter noted at the time that GameStop is "well-positioned to be a primary beneficiary of the new console launches," and should "return to profitability relatively soon." Around the same time, Telsey Advisory Group also came out bullish on the stock, saying that the worst was behind them and there were far more pros than cons to the bull thesis now.
The company’s Q3 earnings report came in a little light on revenue shortly afterward, which knocked shares down by nearly 30%. However, this blip was short-lived as investors happily snapped up more and started a fresh run in the stock which has continued into this week. The key driver here seems to be the success the company is seeing in their aforementioned digital channel. Even though EPS was still deep in the red, revenue was down 30% on the year, and comparable-store sales contracted more than expected, e-commerce sales popped a staggering 257% to show there’s life in the old dog yet.
Looking Good For 2021
Last week, it emerged that RC Ventures had increased their stake in GameStop and were planning to “remain in activist mode” while Hedgeye added GameStop to their Best Ideas for 2021 list. Analyst Brian McGough noted “if the company can execute a turnaround strategy to make GameStop the leading store and online destination for the gaming community, you could have a stock at $50+."
This kind of optimism is sure to make any remaining shorts even more nervous than they already are. The stock has jumped to multi-year highs on the back of a recovery story that’s doing nothing but gaining momentum. April’s $2.57 print seems a long time ago now, will the same be said for today’s $21 print in a few month’s time?
bron: https://www.marketbeat.com/originals/wh ... his-month/
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