Update 8/16/11: Adib Motiwala no longer manages a Covestor model
Author: Adib Motiwala
Disclaimer: Adib owns GME in his Covestor Dividend Value Plus model.
October 19, 2010: GameStop is the largest video game retailer in the world and sells new and used video game software, hardware and accessories for video game systems from Sony, Nintendo, and Microsoft. In addition, the company sells PC entertainment software, and related accessories.
Valuation
On October 19, 2010, GME traded at $18.30 or a little under 8x ttm earning and 6x free cash flow. GME bought back $300 million worth of shares early this year. Recently, the Company announced another buyback of $300 million in shares and retire $200 million in debt, leaving only $250 million in debt. If the company were to buy back shares at $18.30, that would be about 10% of the shares outstanding. Earnings should get a nice lift from the buyback. Gamestop is also investing in a digital strategy and launched a new loyalty program.
