GameStop has been having a brutal year. The video game retailer has lost roughly 70% of its value—but all it took was a little faith from a famous investor to send stock back up. When Barrons reported Wednesday that Michael Burry is going long on the company, shares jumped as much as 20%. Despite the slide, a series of disappointing earnings reports, and concern that digital downloads have overwhelmed its business model, GameStop's "balance sheet is actually in very good shape," Burry said. "I believe they will have the cash flow to justify a much higher share price." Scion Asset Management, Burry's firm, had said Monday it called on GameStop's board to buy back another $240 million in shares, per Markets Insider. Scion says it now owns 3% of GameStop.
Burry was a major character in Michael Lewis' book The Big Short and its 2015 film adaptation. He was also among the first investors to short subprime mortgages before the financial crisis, per CNBC. In his Barrons interview—an exception for the normally tight-lipped Burry—he said Wednesday that he expects Sony and Microsoft to have a physical disk drive in the next generation of their consoles, which are expected next year. That "is going to extend GameStop's life significantly," said Burry, because it will allow customers to keep buying games at brick-and-mortar stores. Also, he said the competition from streaming services makes GameStop's outlook look "worse than it really is." (Read more GameStop stories.)