This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

5 Investing Ideas As GameStop Squeezes Short Sellers

Stocks in this article: ATVI GME MSFT SNE TTWO

CHRIS LAU, KAPITALL: When GameStop (GME) broke past $30 and closed at $32.73, the short-interest, or bearish bet against the company, stood at 43.09 million shares. With 117.84 million shares outstanding, short float was a substantial 36.6%. How did short-sellers get caught off guard, especially when IDC reported sales declined 14% to 76.3 million units and NPD Group said in March 2013 that game sales declined 25%?

For GameStop, it turns out that a strong lineup of game titles for 2013 and extending throughout this year benefits the game reseller. Even though overall game sales are declining, hit titles drive profits for GameStop, game makers, and hardware game suppliers.

GameStop is up nearly 50%, outpacing the Nasdaq index as represented by the Nasdaq PowerShares ETF (QQQ) in the Kapitall chart below :

GameStop Outlook Positive

A renewal in the product cycle for consoles will benefit GameStop. Sony (SNE) is releasing a PlayStation 4 within the next 11 months, while Microsoft (MSFT) is poised to announce the successor to the Xbox 360. Nintendo (NTDOY.PK) also refreshed its Wii last year. Although sales weakened in recent weeks, the refreshed product benefits GameStop because the release improves awareness for games made for Nintendo.

In the past year, only Sony generated a positive return for shareholders. The rapid ascent in the last few months was driven by a drop in the value of the Yen, excitement for the PS4 launch, and strong Sony-made Android phones:

In March, game sales totaled $992.5 million. Take-Two’s (TTWO) BioShock Infinite led sales, beating out Activision’s (ATVI) Call of Duty. When charting the two game makers using Kapitall’s Compar-O-Matic to compare market cap to forward P/E (or “POP”), Take-Two has a much lower valuation:


Investors who ignored the negativity for an overall decline in game sales were right to do so. The negativity for game resellers was so strong that a short-squeeze in GameStop shares led to returns of nearly 50%. The seasonal weakness is fast approaching, and “selling in May” may once again prove itself correct. Investors could use the decline in the overall market to accumulate the companies mentioned.

Written by Chris Lau, Kapitall Contributor


Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,356.87 +288.00 1.69%
S&P 500 2,012.89 +40.15 2.04%
NASDAQ 4,644.3120 +96.4780 2.12%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs