GameStop shares spiked as much as 20% on Thursday after famed "Big Short" investor Michael Burry told Barrons he is going long on the beleaguered company.

The video-game retailer's "balance sheet is actually in very good shape," Burry told the publication. His firm, Scion Asset Management, said Monday that it sent a letter to GameStop's board urging it to complete its $300 million share buyback plan. The company has only repurchased about $62.4 million worth of shares so far.

The letter also revealed Scion now owns 3% of GameStop shares outstanding, or 3 million shares. The investment was worth about $10.6 million as of Wednesday's close.

Burry was a major character in Michael Lewis' best-selling novel "The Big Short." He was portrayed by Christian Bale in the 2015 film adaptation. The investor was among the few to bet against subprime mortgages ahead of the 2008 financial crisis.

Shares of the video game retailer have fallen as much as 75% in 2019 as at-home digital downloads become more popular. A collection of disappointing earnings reports and worries about its future as a physical retailer of primarily digital goods have sent investors fleeing from the stock in recent years.

Burry believes both Sony and Microsoft will keep a physical disk drive in its next-gen consoles. The hardware decision "is going to extend GameStop's life significantly," he said, as consumers will still have the option to purchase games at physical stores.

The famous investor also downplayed the risk of new video game streaming services like Google's Stadia product to GameStop's business model. The new technology allows consumers to play games on any display that runs Google Chrome, with remote servers streaming gameplay to the user's device.

New video-game streaming products hitting the market as the current console cycle ends won't be as bad for GameStop as many investors think, Burry said.

"The streaming narrative dovetailing with the cycle is creating a perfect storm where things look terrible," he said, adding the situation "looks worse than it really is."

GameStop reached an intraday high of $4.25 a on Thursday, marking a 20% gain.

The retailer has one "buy" rating, seven "hold" ratings, and three "sell" ratings from analysts, with a price target of $5.91, according to Bloomberg data.

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