Lieutenant Colonel 
Drives: '23 M4CX - Tanzanite / Tartufo
Join Date: Aug 2014
Location: Bay Area, CA
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Quote:
Originally Posted by premier3is
It is pure gambling.. and I was stating my opinion on GME positions, clearly you can see that from my posts.
That wasn't the point of the post tho, I'm waiting to hear from anyone's who can bring in some insight on GME and why they think it's a good 'investment' long term, for the 3rd time now lol.
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Here.
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Originally Posted by vreihen16
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Quote:
Originally Posted by NorCalAthlete
If you have the capital and are prepared for a rapid turnaround, yes absolutely.
I believe we will hit $500 by Friday morning, and Friday may see a spike as high as $800+. Some people are speculating $2,000 as the ceiling.
Insane? Absolutely. Crazy to hear? 100%.
But let me put it this way - I have a coworker about to dump another $50k into it tomorrow evening or Thursday morning depending on the dips. He has been doing this about 12 years longer than I have and has made massive gains, moreso than his paycheck + bonus combined, off of his other plays. Sure, some tanked, but overall he's done quite well. So I figure at this point when the market's in, the memes are in, the shitposting forums are in, and he's in...fuck yes I'm in. I'm following the herd here for sure but I think if you buy in tomorrow, it will spike by end of day for a small gain. If you hold to Thursday, you will likely double your money. If you have the gumption to play a risky move till Friday, you stand to 5x or more.
Note : I am not a financial advisor, quant, analyst, or anything else remotely related to finance. I have only been doing this for the last year and am very much still learning myself. I would strongly recommend treating this the way you would a game of roulette and only betting what you're willing to lose or feel you can recover from. FOMO is real. As much of a YOLO play as this is, and as much as I could have gained had I risked the 6 figures I've been saving for a house payment, I only put about 15% of my play money into it (ie, I didn't even yolo just the play account, let alone my slow and steady "real" accounts).
YMMV....good luck.
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Quote:
Originally Posted by NorCalAthlete
Making a separate post for this...copying in case this disappears:
https://www.reddit.com/r/wallstreetb...ective_on_gme/
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A Venture Capital Perspective on GME
OCDD
Hi everyone. Long time WSB lurker and I've learned a lot here, so I'd like to give back and hopefully add some value to this sub. I think it’s worth spending a little time laying out my thoughts on why I’m investing in GME as an active early stage VC, and hopefully my insights can help people not paperhand before the real gains are made. I'll try to provide new insights that I haven't seen on this subreddit yet.
Full disclaimer- this is my personal money I’m investing. Positions are 678 shares at a $39.81 average as a starter and looking to open a more significant position in the next few months once a few questions have been answered for me on things I’m looking to see (which I’ll discuss below).
Obligatory rockets: ����������������. If a few things happen, this goes to the moon regardless of a short squeeze. I'll explain why below.
First, a quick overview at how most VC's do due diligence.
How VC's Invest
When we do due diligence on early stage investments (our Fund is a pre-seed and seed Fund with a few Series A deals), there’s a few things we look for, especially when evaluating growth companies in tech are as follows:
What’s the market size? There are three types of market sizes investors look at; TAM, SAM and SOM. Feel free to look up how sizing these markets works if you aren't familiar, this is a long post so I won't waste people's time. The important thing to remember here is that the larger the TAM, the more room for growth and competition and the more interest there is to invest in a space. This is very important for GME and we will come back to why later.
What's the CAGR? (Compound Annual Growth Rate). Basically, is the market expanding or shrinking, and how fast. Again, google this if not familiar.
Experience of the management team- have they actually been there before and demonstrated an ability to scale and exit a company in this space?
Unit economics- do the numbers make sense as this company grows? Is it actually going to be profitable? Every firm looks at these different. We look at CAC/LTV ratios and doubling time with tech companies. The TLDR of this is "how much money does it cost me to get a new customer, how long will they be my customer before they leave, how much money will they spend while they are my customer, and how fast can I double the money I spent on advertising to get that new customer ".
There are a lot more things that obviously go into determining whether something is a good investment or not, but if there are red flags in any of these core areas a tech company is almost always uninvestable.
Now onto why after recent developments I think GME is shaping up to be one of the most attractive investment opportunities that investors have seen in these markets in years, but why many of you will miss out on the majority of the gains long term.
1 and 2) Market size and CAGR. As a gamer myself in spare time and a tech investor this is a market that hasn't even scratched the surface of how large it will get. Gaming is a market worth hundreds of billions, with an explosive CAGR as more young people grow up with gaming being a socially accepted activity and in many people's lives the center of their social experience. Most of you are familiar with this already, so nothing more to be said here.
Now the question in the past was, is Gamestop capable of growing their share of this market? Until Ryan Cohen, the answer was no (and this is why the share price went down to where it was). Again, you all know this. But this leads to the second point of why it is now an attractive option
2) Ryan Cohen. Not from an "excited about a memeing CEO" perspective, but from the most important thing to institutional investors- does he have a proven track record scaling and exiting profitable e-commerce businesses? Yes he does.
Again, you all know all this and it is how the stock price got to here today. Everyone is sitting waiting and watching to see if there is a short squeeze (myself included), and there is a lot of hype and excitement.
But this is leading everyone to miss the forest for the trees because of the 4th point:
GME's Unit Economics have the potential to be best in industry, yet shares are priced at an extreme discount to revenues currently.
I'd encourage everyone to check out this article talking about how companies with strong growth are normally priced by tech investors by one of the A16z partner. https://a16z.com/2020/08/17/role-of-...in-valuations/ The article is titled "why entry multiples don't matter" and helps entrepreneurs understand how valuations of companies can make sense for tech investors.
The short of it is for all the WSBers who can't read: if you have more growth, you get a higher multiple because you will have the potential to produce far more dividends faster, especially in high margin tech companies.
So what is fascinating about GME?
If I was presented a new company that had just driven it's e-commerce revenues 300%!!!!! YoY, operating in a several hundred billion TAM, backed by investors and management who had grown a company in the same vertical to hundreds of millions in annual subscription revenue, and with a strong balance sheet and distribution footprint and a widely recognized brand, 20x topline revenue in the early stages would be considered a steal to invest at.
Instead, GME is priced at a $2.8B market cap, less than half of annual revenues.
This is an unheard of valuation for a growth company to be trading at a discount.
So why is GME underpriced, and why did so many people (myself included) not see or continue to not see this opportunity until now? If it's such a good opportunity, why are shares so cheap?
Most investors are looking at the legacy Gamestop business that has existed for the past decade instead of treating GME like a new startup (CHEWY for Gaming).
If Ryan Cohen can transform GME into a subscription-based membership model where in exchange for your monthly fee you have a one stop shop to all things gaming discounted, you have a company that could easily be valued at a 10-30x multiple on top-line revenues. However, because most investors outside of this subreddit still view it as a traditional brick and mortar play vs. a subscription focused tech company with omnichannel growth strategies, they think a bubble is forming and are shorting it instead of buying in.
So why am I not all in yet but why am I excited?
The most important thing yet to be understood is what does the customer value proposition look like under the new direction Ryan Cohen takes GME. Most large investors will be waiting to see how over the next year the balance sheet is strengthened for growth, what new revenue models can be implemented, and to see if there has been a true pivot from brick and mortar.
This is a company that if management can execute on correctly, most large institutional investors will be clamoring to get a significant stake in and grow it because the gaming market is here to stay and grow. Bear arguments that digital game sales will hurt GME miss the entire point of the pivot. Ryan understands this and wants to instead bring the whole gaming experience in house- everything you buy you want to buy from GME because you're part of their membership program (again think Costco). Those programs are insanely profitable and if the unit economics show that to investors as the company pivots the valuation will soar immediately as people realize it's Amazon Prime, not Blockbuster. However, it is yet to be seen if they can execute on this vision, which is why I am not all in yet.
There is still long term risk which is why this stock is still low. Not a lot but there is some.
Maybe the company doesn't grow? Maybe they reject Ryan's vision?
But here's the bottom line.
If a shift to digital first does occur, and GME becomes a subscription first omnichannel gaming company, the market cap will conservatively be 10x topline revenues.
Let's say that stays flat next year at $5B.
This market cap (matching industry standards) should for an appropriate valuation for a growth stock be $50B.
I know this sounds insane. But if Ryan can complete the transformation he is hoping for this is a very conservative valuation.
A $50B market cap would be $800 a share right now. Again, this assumes Zero topline revenue growth. If revenue begins to grow again 10x will be unrealistic and the multiples will get far higher.
This is why the short squeeze is distracting many. In 5 years if you diamond hands this company, the fair value of shares can range from $800-$2400 and not be in any sort of bubble or unjustified by fundamentals speculation.
TLDR; this company if Ryan does what we believe he will may be one of the most undervalued companies this subreddit has ever discovered. Even if you take profits in a short squeeze, don't forget to keep shares for a long position because opportunities like this rarely come around. I imagine the short squeeze will allow them to issue more shares to strengthen the balance sheet, and the company has a fantastic launch pad to start from with the size of it's existing customer base, brand awareness, and revenue. If it becomes clear that GME will be executing on Ryan's vision even at a $10B market cap this will be a steal and I will open a full position then. I am waiting to expand my position to see what happens with the pivot, as this all goes out the window if GME rejects his strategy.
As always, do your own DD but I have learned a lot about options from this sub and hopefully this helps a few people understand why selling shares may end up being the biggest regret of their life. GME's business model has the potential to look just like Amazon's with a focus on the gaming industry and these shares are only at this price because the market is still looking at the old company and not the new startup that GME could become.
Don't paper hand this one.
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Keeping all this in mind, I DO plan on selling off and then buying back in....probably. Maybe. If it hits 1,000 by Friday I'll probably sell at least half. The price will drop back down, particularly if executing on this pivot flounders. In the meantime I can use the cash to grow further positions.
Base hits with lots of singles and doubles are what win most games. The occasional home run just helps it along and speeds up the process. |
Quote:
Originally Posted by NorCalAthlete
Could have sworn I already posted this but for those still questioning whether Gamestop will even be around in another month after the dust settles here, give this a read and see if it doesn't at least plant a seed of doubt in that viewpoint.
A Venture Capital Perspective on GME
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Quote:
Originally Posted by Cyberdemon
BTW I think this is a good non-emotional read that splits a good middle ground.
https://www.reddit.com/r/wallstreetb...isks_involved/
The volatility of yesterday is a way to drive emotion to make irrational decisions. The stability of today will likely induce some false sense of calm, but that doesn't mean anyone should forget the deck is stacked against the little guy and the fireworks show could get rained out by external forces we were too hyped up about to see coming.
They have more power in this hand than we do and the worlds biggest banks backing these various brokerages and funds (who were already bailed out once by your own tax dollars) still only need one good swat to squish this thing like a fly.
For me I'm OK hedging that risk by knowing some of this money is outside of their grasp and buying in early paid off. |
Quote:
Originally Posted by NorCalAthlete
 Already cashed out my principal. Letting the rest ride to see what happens. Got in at $40, might as well stick it out - worst case I make $0, best case I make $750k or so.
If delusion is what it takes, so be it. Fundamentals went out the window about a year ago. |
Went back and quoted just for you. Some quotes have embedded quotes that didn’t paste over, I can edit this later posting from mobile for now.
__________________
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The single biggest problem in communication is the illusion that it has taken place.
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Last edited by NorCalAthlete; 03-10-2021 at 01:19 PM..
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