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QS Research · Michael Burry's Scion Capital analyst template · 2006

GameStop Corp. (GME)

As of 2026-11-02 · 12/15 boxes filled from SEC filings and market data

Conclusion: SHORT

Conviction medium · base case -53% · downside -93% · upside +0%

Section 13's base omits the $4.9B eBay stake, so I add it as a non-operating asset to a zero-value operating base. On a normalized cycle the operating business has almost no value: six-year average EBIT is -$124.4M and FCF is $18.0M, versus TTM EBIT of $480.0M and FCF of $688.0M that are flattered by non-operating gains and cost cuts. Adding only the hard balance-sheet assets—net cash of $0.90B (N19-N20) and the $4.9B eBay stake from S28—gives $5.80B, or $11.50/share on 504.5M shares, which is 52.7% below the $24.32 price. Downside to the net-cash floor is $1.78/share (-92.7%), while the upside if TTM cash flow persists at the current 5.6% FCF yield is only $24.36/share (+0.2%). The market is paying a luxury multiple for a shrinking, structurally challenged retailer whose reported profits depend on investment swings, so the risk/reward is skewed heavily to the downside. I would short the stock.

Key numbers

The 15 boxes

  1. ✓ 1. Long-form business notes

    GameStop now sells games, collectibles, and entertainment through stores and ecommerce across three geographic segments (United States, Australia, Europe), and its strategy has shifted to capital allocation and operational excellence. Between the FY2020 and FY2025 10-Ks, total stores fell from 4,816 to 2,206 and international operations were streamlined; merchandise now includes collectibles grading services. Six-year data shows revenue fell from $5.09B in FY2020 to $3.63B in FY2025.

  2. ✓ 2. Competitive advantage

    GameStop shows no durable competitive advantage: the 10-K describes the industry as intensely competitive, with large multi-channel and digital rivals. Operating income was negative in five of the last six fiscal years and only turned positive in FY2026 ($232.1M), while revenue fell from $5.27B in FY2024 to $3.82B in FY2025 and $3.63B in FY2026. Net income from FY2024 onward was lifted by non-operating investment gains, not core retail profitability. The shift to digital delivery and dependence on allocated collectibles further weaken any moat.

  3. ✓ 3. 10-Q takeaways

    GME's Q2 FY2026 net sales fell 18.7% YoY to $790.2m, but gross margin rose to 43.7% from 29.1% as mix shifted to collectibles, and SG&A fell 14.5%. Net income of $298.7m (H1 $688.3m) was inflated by non-operating items—$166.3m derivative gain, $72.1m unrealized eBay gain—while digital assets lost $75.0m. Liquidity was $5,354.4m in cash/securities/digital assets plus a $4.9b eBay stake; a new $2.0b buyback is unused. The company has no binding acquisition and expects no significant store closures in FY2026; risk factors unchanged.

  4. ✓ 4. Corporate governance
  5. ✓ 5. Overview of the prior 3 years of 8-K filings
  6. ✓ 6. Other significant filings
  7. ✓ 7. Chronology of significant news and events
  8. ✓ 8. Comparables valuation interpretation
  9. ✓ 9. Insider trading interpretation
  10. ○ 10. Earnings-call notes
  11. ○ 11. Impression of the shareholder letter
  12. ○ 12. Scuttlebutt overview
  13. ✓ 13. Valuation and risk/reward summary
  14. ✓ 14. Current price suppression and potential catalysts

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