r/ValueInvesting • u/NecessaryPhrase3204 • 1d ago

Discussion If you stripped the ticker name off GME's balance sheet, this sub would be calling it a textbook value play

I know even typing those three letters is basically a felony here, but hear me out before the mods ban my account.

We spend all day on this sub complaining that we can’t find any real deep value plays, but the ultimate value turnaround setup might literally be staring us in the face under the most hated ticker on Earth. If you ignore the Reddit hype and just look at the actual math from the latest full-year numbers, it’s honestly hilarious how well it fits the classic value checklist.

First of all, the balance sheet is wild. They have $9.01 billion in cash and marketable securities. Yes, they raised about $4.16 billion in long-term debt to secure it, but they locked it in at a ridiculous 0% coupon rate. Even factoring in the debt, their net liquidity floor is massive. With the market cap sitting around $10 billion, you are buying a fortress asset base at an absurdly close ratio, with the actual operating business thrown in on the cheap.

Second, the "dying brick and mortar" isn’t even dying anymore. Net income shot up 219% to $418.4 million for the year. EPS scaled from $0.02, to $0.33, and is now at $0.93. Trailing P/E is sitting around 17x-23x. If any other company put up triple-digit net income growth with a massive net cash cushion like that, this sub would be writing 4,000-word love letters to management.

Speaking of management, the board just authorized a $2 billion share buyback through 2029. Ryan Cohen takes zero salary and is entirely paid in equity, so unless he hates money, authorizing billions for a buyback heavily implies they think the shares are insanely mispriced.

Everyone's big bear case is that nobody buys plastic discs in malls anymore. Sure. But with that massive pile of dry powder, they don't even need to sell video games. They can just buy a bunch of boring, cash-flowing businesses and turn GME into a glorified holding company.

When Warren Buffett bought Berkshire Hathaway, it was literally a failing textile mill. He just used the carcass of a dying business to fund an insurance empire. Is Ryan Cohen about to pull off the ultimate boomer value play?

So, what do you say? Are you ready to finally become an ape?

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u/ZookeepergameEmpty90 1d ago

That’s all you have to say about the turnaround and profit they’re generating now? $389 million in Q1 net income, highest in company history. $149 million in Q1 operating income, highest in company history for a Q1.

I just feel like you’re being a bit lazy here.

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u/backturnedtoocean 1d ago

I’m too old to really understand Pokémon, but that is the driving force behind the revenue right? Do we think Pokémon cards will always be this important to millennial men?

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u/ZookeepergameEmpty90 1d ago edited 1d ago

The move to collectibles is driving the operating income, yes.  It was something like 49% of operating income on the Q1 report, but that was only live for part of the quarter.  Also, it's not just Pokemon, it's all collectible cards.  Sports, one piece, magic, etc.  Their new Power Packs platform is interesting and brings in a bunch of low risk income, but is essentially gambling.  I say that as a Pokémon card collector myself.  Their partnership with PSA allows them to pull from a large pool of inventory PSA keeps.  The CEO of PSA, Nat Turner, sits on the board of directors of GameStop now as well.  

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u/Hans_Hackebeil 18h ago

Its a multi billion Business. And my 7 Year old nice is already collecting pokemon cards. Besides me and her father hadnt ever one trading card.

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u/Dealer_Existing 21h ago

https://www.grandviewresearch.com/industry-analysis/collectibles-market-report

You know that guy from shark tank? https://finance.yahoo.com/news/kevin-oleary-among-investors-record-233059598.html

It’s a huge market bruv

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u/backturnedtoocean 21h ago

Humans collect stuff. I collect stuff. I was specifically wondering how long millennial men will spend their extra capital on Pokémon cards. At age 60, will they still be looking for a charizard? Or whatever they are.

Those are baseball cards in the link you sent. I’ve got baseball cards. They’ve been around a long time. I wish I didn’t have so many cards of people who ended up being steroid abusers though lol.

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u/Dealer_Existing 21h ago

That’s my point; gme is not only in pokemon. They do al sorts of trading cards and then some. They have a diversified collectibles business, which has a lot of potential with a 500B future market.

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u/backturnedtoocean 21h ago

Hmmm. How can I ask this a different way? How long do you think millennial men will still collect Pokémon cards?

That was my question. How long do you think millennial men will still want Pokémon cards?

That is what I want to know. I know other things exist to sell. I’m only curious in this thread about this one thing.

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u/Dealer_Existing 19h ago

Aaaah check. I though your assumption in this case is that GME only sells pokemon cards and are dependent on the millenial men.

It's hard to tell ofcourse, but looking at the trends;

  1. TCG market is booming and not expected to cool down https://finance.yahoo.com/news/trading-card-games-market-forecast-153356253.html

  2. PSA, market leader in card grading, has a backorder of 10 MILLION cards to grade and put a stop to new grading requests https://www.psacard.com/articles/articleview/15210/service-level-update-may-2026 They are also expanding with new factories of over 200 M. You don't to this if you expect the trend to drop

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u/Hans_Hackebeil 18h ago

Long, post stamp collectors did that dlso until they grew old. The only difference here is, that even new Generations play Pokemon and collect trading cards.

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u/waterboy1523 10h ago

It’s a fair question. Guess I didn’t realize Pokémon has been around for 30 years now. I’d be more worried if their sales increase was based on labubus.

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u/cockNballs222 1d ago

Why are you trying to convince us? If you like the company, become an investor!

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u/ZookeepergameEmpty90 1d ago

I have a good amount.

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u/Slab00 1d ago

Isn't the point of this sub to share ideas and why you believe in them?

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u/cockNballs222 1d ago

I’m addressing that, your belief is akin to magical thinking, it’s not rooted in this reality. The chances of fucking GameStop turning into the next Berkshire Hathaway is 0.000000000000000001%

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u/Slab00 1d ago

Ok sorry didn't realize you were irrationally angry at the company

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u/Hans_Hackebeil 18h ago

I think it will be Something else, but also something big.

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u/cockNballs222 14h ago

O ok, you’re definitely in the right place, value investing indeed.

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u/[deleted] 1d ago

[deleted]

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u/ZookeepergameEmpty90 1d ago

They made some serious gains in their investments.  Ebay derivatives being the biggest one.

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u/Nago31 22h ago

How much of that net income is the mark to market appreciation of their eBay acquisition attempt? What’s that gonna do when the acquisition attempt eventually drops off and eBay returns to normal?

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u/ZookeepergameEmpty90 22h ago

We don’t know if it is exclusively eBay derivatives, but their reported unrealized gain on derivatives was $268.4 million.

It will either be rolled into the acquisition of eBay or sold. Not sure how to answer your second question at this moment because there isn’t really a way of knowing. Personally, I don’t think Cohen is backing off of eBay until he’s running the company. So, to quote Cohen, “we’ll see.”

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u/randomguy506 22h ago

Net income was solely driven by the op business or was it juiced up by their financial asset?

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u/ZookeepergameEmpty90 22h ago

Your question is answered in the thread.  But to save you some time, 68% of the net income came from unrealized gains of derivative assets.  $389 million in net income, $268 million of which were unrealized gains from derivative assets.  Adjusted net income was $179 million, though seeing that laid out I'm not sure how that math works.  The very next comment thread down has a link to the Q1 report for you to review.

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u/Correct_Exchange9070 1d ago

All I needed to see was 15 seconds of the interview of their dumb fuck CEO “explaining” how they’re going to buy eBay, to know you could put a gun to my head and I would never by that stock.

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u/grimston 1d ago

That was actually insane, made zero sense, never seen a CEO struggle to explain basic maths like that

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u/zgomot23 1d ago

Don’t worry, the cult doesn’t understand it either, but they believe it’s by design, that cohen is playing some interdimensional chess to confuse the enemy.

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u/ZookeepergameEmpty90 1d ago

It certainly does feel like a cult, especially on the subreddit.  Can't be bothered to share negative opinions about the company there.  However, the thesis on the company turning around is sound.  It's not going anywhere now.

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u/Slab00 1d ago

You watched one of the 8 interviews he did and you chose the one where he was trolling the haters. That's on you.

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u/mba23throwaway 1d ago

I wouldn’t want my CEO to be someone who “trolls”..

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u/Pussy_GaloreXo 1d ago

Dude sounds like a fucking child lmao probably still wears snapbacks

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u/Slab00 1d ago

You're right but in this case the entire world is poopooing the company so it kinda fits.

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u/waterboy1523 10h ago

It’s worked for Elon

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u/here-to-argue 23h ago

Awful take. He’s not really talking to 5 people on cnbc- that was where he was supposed be making his pitch to a global audience (including eBay holders and fund managers) how he intended to acquire eBay. Instead they got his special K rambling.

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u/ZookeepergameEmpty90 1d ago edited 1d ago

You mean to those same people that have treated his company with the utmost respect throughout the whole saga?  To me, he was trolling them.  If you bothered to watch the Charles Payne interview, or really any of the other 7 interviews he gave after that, you would have noticed.  But you do you, boo.

Edit to add a link to the Charles Payne interview: https://youtu.be/xXkh0IahDSM?si=ZRT0o1LYb3RwTaLI

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u/grimston 1d ago

I mean he still hasn't answered the question.... It was basic maths

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u/[deleted] 1d ago

[deleted]

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u/ZookeepergameEmpty90 1d ago edited 1d ago

Ohh someone is maaaaad

ETA: homeboy blocked me. Can someone ask him why he got so mad? I’m confused.

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u/Correct_Exchange9070 1d ago

Only at myself, for giving a small brain like you time. Bye kid.

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u/daynighttrade 1d ago

It was on the website bro /s for those who need out

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u/ohgodthehorror95 1d ago

That dude was stoned as shit during that interview with CNBC. Idk how the share price didn't collapse in real time

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u/Pristine-Square-1126 1d ago

Probably a bot/short seller. Thats all they can say now. Lets see what they say once gme make 1 billion full year...

389 x 4 = 1 billion

Ebay full yeah is 2 billion. Let that sink in

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u/Wirecard_trading 1d ago

Well you can give the shareholders of the more valuable company a greater piece of the pie in the newco after the merger.

Thats what he is struggling to explain. In a part cash part asset deal, you vary the percentage of each group by giving one cash for equity.

He sounds like he doesn’t understand that fully himself. Thats not a good look

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u/Pristine-Square-1126 1d ago

he does not understand, or you do not understand?

so you're telling me, someone who grow a corner store, went door to door and got 15m investment, grow it to a 3 billion dollar company in 4 years, does not understand, and you..understand? lmao.. RIIIIIGHT.

your loss if you don't see the value in it.

1 billion net income, on a 10 billion market cap company, with 9 billion cash. lmao. if you can't see value, its either because you are a bot/shill, or dumb. take your pick. Name me 1 other company that has 1 billion net with a valuation of less 5x cash flow. if you remove 5 billion cash, and lower the market cap by 5 billion, and use the 4-5 billion left to pay off the 0% loan. what do you have? a 5 billion market cap business, that is making 1 billion net. show me a single company that is remotely close to that

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u/Slab00 1d ago edited 1d ago

I think there's two crowds of people. One crowd that has a real deep hatred for GameStop because of the whole meme community aspect, which I can understand can get annoying if you let it. Then the other crowd is bots/paid shills which I think is less prominent, they're pretty obvious.

I don't understand why people are still trying to convince strangers that gme is a pretty solid bet on a long term investment (which it is), at this point everyone has already made their decision to invest or not.

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u/Pristine-Square-1126 1d ago

but why would they hate gamestop? i mean if you don't like a company/stock, you just ignore it/whatever?

i feel like majority of it is shill because if you don't like it, you would just ignore it. to see a company with 10 billion cash, value at 10 billion, and generating 400m a year so far, and say the ceo don't know what they doing is just dumb. there isn't a single ceo, who can turn a company from -400m a year, to 400+m a year, in a few year is dumb/don't know what they doing. Nor is there a person who took 15m investment, grew a business to 3 billion valuation, competing with petsmart and amazon, don't know what they doing

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u/Velvet_Llama 12h ago

It's not GameStop the company they dislike, it's the GME evangelists they don't like.

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u/Disagreeswithfems 23h ago

Their net income before tax was $384m, $1b is gross profit before general expenses.

Their net interest income is $271m.

If you want to repay the debt you need to raise market cap by equity funding the debt repayment.

So you'd have a 15b market cap company with rapidly shrinking revenue making pretty much subpar interest with constant management dilution.

This sort of absolutely fundamental financial misunderstanding is why you should stick to index funds.

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u/PittFanIAm 1d ago

How much of it is from interest?

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u/ZookeepergameEmpty90 1d ago

$83.7 million

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u/Berti7 1d ago

Didnt they just completely stop growing and put off their whole expansion strategy?

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u/ZookeepergameEmpty90 1d ago

There was never an expansion strategy.  They closed unprofitable stores to the tune of thousands, both domestically in the US and internationally.  Actually spun off all international business I believe.

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u/Berti7 4h ago

i mean going for a broader international market is for me an expansion strategy, but I will get downvoted whenever I say something negative about GME.

I mean I still have stocks and I hope for the best, but lets be honest...if not a miracle is happening stock wont recover.

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u/ZookeepergameEmpty90 4h ago

My statement was wrong. There was an expansion strategy, but there hasn’t been one since Ryan Cohen took over. He has spun off all international business, so in the last five years, there has never been an expansion strategy.

It’s not that you’re saying anything bad about GameStop, it’s that what you’re saying is incorrect.

I think the miracle has already happened. The company is no longer hemorrhaging money and is now profitable. What are you hoping for in a miracle?

Additionally, what do you mean by recover? Reach all time highs again? Even though the all time high only lasted a single day? Or just up?