Keith Gill’s GameStop investment thesis: August 2020 vs June 2024

Is this the moment we found out the kitty has no clothes?

6/7/24 1:39PM

Thesis drift is a helluva thing. After watching Keith Gill’s livestream, I’m struck by how much different the bull case for GameStop sounds now relative to 2020.

In short, he confirmed my view that GameStop is about two people: Keith Gill, who enables the company to raise lots of money from retail investors, and Ryan Cohen, who would hopefully use that money wisely to reinvent the business. But that’s what it is: hope.

Of course, Gill may feel more restrained from getting into the nuts and bolts of investment theses – and is under no obligation to share his views – but the deep intellectual rigor that underpinned his original bullish stance on the company has vanished, at least from the public eye.

Here are some quotes from Keith Gill’s August 2020 livestream where he unpacked his thinking on GameStop:

“at a market cap of $260 million and an enterprise value of about $100 million, the downside is limited”
“...a reasonably fair net asset value of about $400 million...”
“Over the next 18 months, GameStop could generate enough free cash flow to pay off its debt, exhaust its buyback authorization, and still have an adequate financial foundation to continue pursuing new revenue streams”
“...it trades so cheaply and is so heavily shorted, that all that may be needed to revalue its stock is a shift in sentiment”
“I’m just a security analyst in search of asymmetric upside”
“It’s highly unlikely GameStop’s equity is worth less than $250 million”
“GameStop’s legacy business is probably worth between $500 million and $1.5 billion”
“There’s a non-zero chance that GameStop successfully reinvents itself”

And here are some quotes from Keith Gill’s livestream on GameStop just now:

“If you remember my previous thoughts on the company and the opportunity, there was kind of like a two-part thesis to it, and that second part of the thesis is a reinvention of the business model or a transformation, whatever you want to call it”
“It becomes a bet on the management, in particular, of course, Ryan fucking Cohen”
“I felt like I see enough where I believe this guy, I believe he might be able to do it”
“He seems like he has those characteristics in the way he approaches this, seems like he might be able to do this, it’s kind of based on feel”
“The question marks will be: Well, what has he done? What is he doing? What’s the plan? Those are fair questions, but you know, do you really think he’s been doing nothing?”
“I think we’ve seen enough from him to think he’s got a good head on his shoulders, and he’s, again, we haven’t seen anything, it’s speculation”
“We don’t know a plan”
“...even the legacy business, cutting costs, trying to stabilize some cash flows, but now it’s all about the transformation, and that cash pile is growing”
“I personally don’t think three years is too long in this case -- five years, 10 years, alright”
“In this case, the absence of evidence is not evidence of absence”
“I think with a significant amount of capital, I don’t know, let’s see where it goes from here”
“Reminds me of the Dark Knight, you post a couple of memes, a couple of screenshots, and everyone loses their minds! Chill, chill, chill, it’s OK”
“‘We thought he wasn’t crazy.’ That’s your bad, for thinking I’m all there.”

Luke Kawa14m

AI energy plays soar on an explosion of call buying

Like their quantum computing counterparts, AI-linked energy plays are benefiting from an explosion of bullish options activity on Thursday.

Oklo is up double digits with call volumes above 106,000 as of 2:46 p.m. ET, more than double its 20-day average for a full session, with a put/call ratio of about 0.6. Call options with a strike price of $110 that expire this Friday (which are now in-the-money thanks to today’s surge) are seeing the most activity.
Nuscale, another nuclear energy play, seen nearly 140,000 call options change hands versus a 20-day average of 51,073.
And fuel cell company Bloom Energy has traded nearly 80,000 calls, roughly twice its 20-day average, with a put/call ratio of about 0.3.

During his appearance on Joe Rogan’s podcast released on Wednesday, Nvidia CEO Jensen Huang talked up the potential for nuclear energy, saying, “In the next 6-7 years I think you are going to see a whole bunch of small nuclear reactors.”

This adds to the evidence that the speculative bid is back in a big way after smaller stocks tied to the AI boom and quantum computing cratered from mid-October through most of November as credit risk began to seep into the AI trade.

Old electronic items tossed on ground for disposal, Hudson

Technology giants don’t look like they used to, as the asset-light era fades

Oracle and Meta are now some of the most capital-intensive businesses in the S&P 500, spending more than energy giants. I guess data really is the new oil?

David Crowther2h

Matt Phillips2h

Space stocks rip amid speculation on Altman joining race

Space stocks AST SpaceMobile, Planet Labs, and Rocket Lab all soared Thursday amid a recovery in the high-beta momentum class of shares coveted by some retail traders.

(High-beta momo stocks are basically shares that have been on a winning streak for a while, and tend to go up a lot more than the overall market on positive days. Goldman Sachs includes all three of the aforementioned space stocks in its themed basket of such shares.)

There’s little other fundamental news out there on the companies themselves.

But a Wall Street Journal report that OpenAI impresario Sam Altman has been toying with the idea of entering the space industry, potentially standing up a rival to Tesla CEO Elon Musk’s Starlink satellite service, may also be contributing.

As we’ve mentioned elsewhere, sometimes these stocks seem to trade on a what’s-bad-for-the-Musk-empire-is-good-for-us-and-vice-versa vibe.

Matt Phillips4h

Intel sinks on news it will hang on to networking unit

Intel dropped in early trading Thursday after it disclosed plans to retain ownership of its networking unit following a strategic review of operations.

The unit, known as NEX, makes products like infrastructure processors, which do needed “housekeeping” tasks like running security checks, thereby freeing core Intel CPUs to do the higher-value operations. It also produces switches and controllers that manage and direct the flow of data to CPUs.

Intel Shelves Plans to Sell Networking Division After Review

Luke Kawa4h

Quantum computing stocks soar on return of bullish options bets

The calendar says December, but the price action is starting to look a lot more like September to me:

Quantum computing companies IonQ, Rigetti Computing, and D-Wave Quantum are all up at least 7% as of 11:04 a.m. ET, buoyed by a wave of bullish options activity.

Nearly 50,000 calls in IonQ have already changed hands, well above the 20-day average for a full session, with activity concentrated in strikes from $50 to $55 in contracts that expire between Friday and mid-January. Its put/call ratio is near 0.2, versus an average of over 1 for the past 20 sessions.
More than 65,000 calls have traded in Rigetti, a hair shy of its full 20-day average. Like IonQ, options activity has a bullish tilt, with a put/call ratio of about 0.7 versus a 20-day average of roughly 1.2.
D-Wave, which received positive commentary from Evercore ISI on Wednesday, isn’t seeing call activity as elevated as its peers, but the options action is also very skewed toward the bull side, with a put/call ratio of less than 0.3 versus a 20-session average of 0.7.

Pure-play quantum computing stocks nearly doubled from late August to late September amid heavy options market activity thanks to reports on government support for the sector, M&A activity, tech breakthroughs, and a flurry of price target hikes by Wall Street.