Summary
GameStop's business may be in a lot of trouble as its highly-profitable used-game sales wither.
We think the company's equity price could languish for years, but will private equity come to the rescue?
We think private equity could value GameStop's shares north of $20 each. GameStop has been awfully quiet of late.
By The Valuentum Team
Although things aren't that bad yet, we think the end game has become clear at GameStop (GME). The company continues to generate considerable free cash flow, on average $400 million, during the past three fiscal years, and it has a relatively net-neutral balance sheet at fiscal-year ends. But GameStop faces an uphill battle. Its total global sales fell 5.5% during its fiscal first quarter, released late May, a decline almost wholly attributable to same-store sales weakness (though it did face a difficult comp given Nintendo’s (OTCPK:NTDOY) (OTCPK:NTDOF) launch of the Switch in the prior-year quarter).
