24/7 Insights
- GameStop Corp. (NYSE: GME) is not worth its current market cap of $20 billion.
- Its business model and quarterly results leave much to be desired.
Keith Gill (aka Roaring Kitty), the online mover and shaker of stock prices, has been back trading GameStop Corp. (NYSE: GME) shares. That has driven them up by high double-digit percentages some days. People have joined him, hoping to get rich fast. However, the stock has traded down for some hours over this period, so the fortunes are only for the lucky. Gill plans to return to YouTube for the first time in three years. Traders have gone wilder, and there has been another buying frenzy.
What Is GameStop Worth?
What is GameStop worth? Not its current market cap of $20 billion, which is based on a stock price of $62 per share. It is better to look back at the price before the feeding frenzy. Four years ago, it traded for $5. After the massive run-up three years ago, but before the current one, the stock traded at $11. Based on its financial results, these lower prices are closer to a rational valuation.
GameStock is little more than a dog based on its earnings. CNBC states, “The video game retailer posted net sales of $881.8 million for the period. That’s down 29% from $1.237 billion a year prior. To be sure, the company’s quarterly loss of $32.3 million was narrower than the year-earlier period’s of $50.5 million.”
GameStop’s business model is hampered by its physical stores selling hardware, which was 57% of revenue in the most recent quarter. Although that number is shrinking, GameStop has over 4,000 physical stores to sell these. That means rent payments and people to run the locations. The company carries $387 million in operating lease obligations on its balance sheet.
Great investors like Warren Buffett and Peter Lynch have always told investors to look at company financial fundamentals. Concerning GameStop, not many people have gotten this message.
10 Life Lessons From Warren Buffett Everyone in Their 20s Should Hear
∴
Is Your Money Earning the Best Possible Rate? (Sponsor)
Let’s face it: If your money is just sitting in a checking account, you’re losing value every single day. With most checking accounts offering little to no interest, the cash you worked so hard to save is gradually being eroded by inflation.
However, by moving that money into a high-yield savings account, you can put your cash to work, growing steadily with little to no effort on your part. In just a few clicks, you can set up a high-yield savings account and start earning interest immediately.
There are plenty of reputable banks and online platforms that offer competitive rates, and many of them come with zero fees and no minimum balance requirements. Click here to see if you’re earning the best possible rate on your money!
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Latest from 24/7
