This is a step-by-step stock review to answer the question, is GameStop (GME) stock a good buy?
This article will teach you how to use the 4Ms of investing. This will be a detailed walkthrough to show you how the 4Ms work and why they are important. If you are interested, you can log into Tykr to use the 4M Confidence Booster (Powered by OpenAI) which will allow you to complete a 4M Analysis in less than 60 seconds.
What are the 4Ms?
- MOS (Margin of Safety) – The MOS is the math part of investing which includes the Summary, Score, and MOS (Margin of Safety).
- Meaning – The meaning is the business model and how scalable the revenue streams are.
- Moat – The moat is how the business compares to other companies in the same Sector and Industry.
- Management – The management is the track record of the CEO.
What 4M score are we going for?
- 80-100 = High confidence – Yay! You should have high confidence buying this stock. It passes all 4M!
- 60-79 = Moderate confidence – Alert! There may be better stocks in the market. Only buy this stock if you truly believe the company will improve!
- 0-59 = Low confidence – Warning! There are better stocks in the market. Due to the low score, you should consider looking at other stocks.
Table of Contents
The following links will direct you to key topics to help answer the question, is GameStop (GME) stock a good buy?
1. GameStop Company History
When investing in stocks, it’s important to know the company’s history. This helps us understand the various revenue streams, if they acquired other companies, how they grew through difficult times, and how they separated themselves from the competition.
- Founded in 1984: Originally opened as Babbage’s in Dallas, Texas, focusing on software retail.
- Early Growth: Expanded rapidly in the 1980s and 1990s, merging with Software Etc. to form NeoStar Retail Group.
- Rebranded to GameStop in 1999: Following the acquisition by Barnes & Noble, rebranded as GameStop, focusing primarily on video games and gaming merchandise.
- Rapid Expansion: Grew through acquisitions of competitors like EB Games, FuncoLand, and Micromania, becoming a leading global gaming retailer.
- IPO in 2002: Went public on the New York Stock Exchange under the ticker symbol GME.
- Digital Transition Challenges: Faced significant challenges with the shift to digital gaming, impacting physical store sales.
- Pivot to Digital: In recent years, made efforts to pivot towards e-commerce and digital gaming solutions.
- 2021 Stock Surge: Gained massive attention from retail investors, causing a historic short squeeze and significant stock price volatility.
- Leadership Changes: Appointed new executives, including a CEO from Chewy, to steer the company towards a tech-centric future.
- Community Focus: Maintains a strong community of gaming enthusiasts, providing a wide range of gaming products and experiences.
- Future Vision: Continues to adapt and innovate, aiming to transform into a technology-driven, customer-focused company.
2. MOS (Margin Of Safety)
When investing in a company, the first step is to look at the financials. Fortunately, Tykr does this for us automatically. The higher the score, the stronger the financials and the safer the investment. The higher the MOS, the higher the potential returns you can make.
- Summary: overpriced
- Score: 28
- MOS: 1%
To see the most up-to-date Summary, Score, and MOS, please log into Tykr.
3. Meaning
When investing in a company, it’s important to know how a company makes money. A mature business model has multiple streams of revenue which allow the company to weather downturns in the economy.
Here is how GameStop makes money:
- Retail Sales: Sells video games, consoles, and accessories in stores and online.
- Pre-Owned Games: Buys and sells used games and consoles at discounted prices.
- Digital Sales: Earns from game downloads, DLCs, and subscriptions online.
- Collectibles: Sells action figures, apparel, and memorabilia.
- Hardware Sales: Sells consoles, controllers, and peripherals.
- Trade-In Program: Allows customers to trade used games and hardware for credit or cash.
- PowerUp Rewards Program: Offers memberships with discounts and benefits.
- Digital Advertising: Earns revenue from website and digital platform ads.
- Events and Conventions: Generates income from gaming events.
- Merchandise Sales: Sells branded gaming merchandise and apparel.
- E-commerce: Makes money through online sales and digital transactions.
GameStop uses these revenue streams to maximize earnings and provide diverse services to gamers.
Here are a few of the other companies that GameStop has acquired over the years. This is important because a company will use a “Buy before build” philosophy to go to market faster and add additional streams of revenue. A company with more revenue streams has a more stable business model. Keep in mind, that most companies don’t build new software because it takes too long to go to market and generate revenue.
- Micromania
- Spawn Labs
- Impulse
- BuyMyTronics
- Simply Mac
- Geeknet
4. Moat
When investing in a company, it’s important to understand how a company ranks against other companies in the same sector and industry. Based on the Score, here is how GameStop stacks up against other companies.
- MINISO Group Holding Limited. (MNSO) – 83
- Chewy, Inc. (CHWY) – 78
- Coupang, Inc. (CPNG) – 78
- Williams-Sonoma, Inc. (WSM) – 72
- Murphy USA Inc. (MUSA) – 67
- GameStop Corp. (GME) – 28
To see the most up-to-date Summary, Score, and MOS and each stock, please log into Tykr.
5. Management
When investing in a company, it’s important to understand who the CEO is, what they have accomplished in the past, and how they have helped this company grow. Good leaders typically have stronger cultures, less turnover, and better returns in the stock market.
- Stock Price Surge: Ryan Cohen played a key role in driving the surge in GameStop’s stock price through his involvement and public support.
- Strategic Shift: He initiated a major strategic shift, focusing on transforming GameStop into a digital-first company.
- Leadership Changes: Cohen spearheaded significant changes in the company’s leadership, bringing in experienced executives from leading tech companies.
- E-commerce Expansion: Accelerated GameStop’s expansion into e-commerce, enhancing its online sales capabilities.
- Customer-Centric Approach: Emphasized a stronger customer-centric approach, improving customer service and engagement.
- Revitalized Brand: Helped revitalize the GameStop brand, making it more appealing to a younger, tech-savvy audience.
- Community Engagement: Fostered a stronger community engagement, particularly with retail investors and gaming enthusiasts.
- Operational Improvements: Focused on streamlining operations and reducing inefficiencies within the company.
- Technology Investments: Invested in new technologies and infrastructure to support the company’s digital transformation.
- Market Presence: Strengthened GameStop’s presence in the gaming and tech markets, positioning it for future growth.
6. 4M Score
All of our homework on this company leads up to the 4M Score. A lot of investors only look at the numbers. Yes, it’s important to look at the first M (MOS) which is the math part of investing but it’s also important to look past the numbers and also look at the Meaning, Moat, and Management. If all 4Ms pass, we should have high confidence in buying this stock.
What 4M score are we going for?
- 80-100 = High confidence – Yay! You should have high confidence buying this stock. It passes all 4M!
- 60-79 = Moderate confidence – Alert! There may be better stocks in the market. Only buy this stock if you truly believe the company will improve!
- 0-59 = Low confidence – Warning! There are better stocks in the market. Due to the low score, you should consider looking at other stocks.
👉 The 4M Score of GameStop (GME) is 48/100.
To see the most up-to-date 4M Score, please log into Tykr.
7. Is GameStop (GME) stock a good buy?
Some of the top questions investors can have is GameStop (GME) stock a good buy or should I buy GameStop (GME) stock?
GameStop presents a mixed investment opportunity. On the positive side, under the leadership of Ryan Cohen, the company has pivoted towards a digital-first strategy, focusing on e-commerce and expanding into the digital gaming and collectibles markets. This transformation aims to modernize its business model and capitalize on the growing online gaming industry. GameStop’s strong community engagement and brand recognition also support its potential for a turnaround.
However, there are significant risks. The company faces intense competition from both digital and brick-and-mortar retailers. Additionally, the volatility seen in its stock due to retail investor activity can lead to unpredictable price movements. The ongoing shift away from physical game sales also challenges its traditional revenue streams.
Overall, while GameStop’s strategic changes and strong brand provide growth potential, the high risks and market volatility make it a speculative investment. Investors should weigh these factors carefully.
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To truly know if GameStop is a good stock to buy or sell, we recommend you log into Tykr. Within seconds you can see the Summary, Score, MOS, and 4M Score.
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The Summary, Score, and MOS of this stock may have changed since the posting of this review. Please login to Tykr to see up-to-date information.