!!! Correction to: previous post of mine
I will give some nuance to the things I wrote. For GME I estimated a value in the range of $12-17 per share by using an EV / FCF multiple of 8-10 times the average FCF over the period '16-'19. I just picked something in between, hence the $15 per share. However, I would consider selling around the $12, assuming no share repurchases happen.
Now about the buybacks... I was thinking the following, please correct me if I made a mistake! Assuming GME uses $200 mln to buyback their shares at say $6 per share, they obtain about 30 mln shares. If these are retired, the current outstanding amount of 90 mln shares is lowered to about 60 mln. So, ex share repurchases with a $1.1 bln market cap for GME: $1.1 bln / 90 mln = $12 per share as mentioned above. With repurchase: $1.1 bln / 60 mln = $18 per share. As the shares are undervalued (at least that is what I am claiming here) every dollar used for buybacks creates additional value for shareholders.
According to shortsqueeze.com the short interest in GME is above 75% with a short interest ratio (days to cover) of 9. So in case that a buyback occurs in combination with the uptick in '20-'21 FCF, some kind of short squeeze occurs propping up the stock to at least its fair value within a smaller amount of time, with a higher annualized return as a consequence.
In conclusion, I will sell GME at a share price of around $18 if a substantial buyback occurs, if not, around $12.
Nya |
