Two words, Wii Fit. I know this is a far cry from fundamental analysis so I'll get to that next...but first Wii Fit. This game is a game changer. While GTA is a popular game amongst video game enthusiast, I think Wii Fit will be popular with video game enthusiasts and many many more. This game represents the first time a game manufacturer has truly bridged the gap between a game and fitness. With so much of America facing serious weight issues...and the economy in trouble causing those gym fees to really sting, I think GameStop could really stand to profit.
So now for the fundamentals...a healthy distance from it's 52 week high and a PEG of 1.09 tells me that GameStop has plenty of room for growth. In February Citigroup upgraded to a buy from a hold - this recommendation came-in far before the Wii announcement and I think we'll see more analysts weigh-in as Wii Fit starts really putting some numbers on the board. Total current assets is greater than total current liabilities but not by much. Looking at the overall assets vs. liabilities it's easy to see that GME has more than enough assets to cover their liabilities. Cash position isn't as strong as last year but still in a very positive cash position. If you look closely the main difference in cash positions is actually based on borrowings made this year to promote expansion - this can only be seen as a good thing. Net income has grown by just about 55% y/y so we can see a nice steady uptrend here.
Okay, so there you have it, my "gut" feeling combined with some good fundamental analysis that I think makes a strong case for why GME will be a great stock to own in 2008.
$51.09 (05/20/08)
