Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: $Value$ who wrote (62823)	11/6/2019 2:52:37 PM
From: Nya_Quy	1 Recommendation Recommended By Lance Bredvold Respond to of 78462

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. Now I use that the fair value of the commons is at the lower end of the range, so about $12 per share. This implies that every dollar used to buyback shares has increased in value from $1 to $2, i.e. $1 of value is created in the process. Hence, the total $200 mln buy back created an additional $200 mln. This latter amount is now represented by the 60 million shares left, thus creating additional value of a little more than $3 per share. Adding the $3 per share to the valuation ex share repurchases gives $15-20$. 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. Nya

To: $Value$ who wrote (62823)	11/6/2019 5:25:49 PM
From: Nya_Quy	Read Replies (1) \| Respond to of 78462

!!! 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