will report on the results of his Tuesday quarter of January. What this means for the stock is a guess.
In a note Thursday, Wedbush analyst Michael Pachter wrote that GameStop is “well positioned to be a major beneficiary of the new console launches.” But he believes the stock is trading at levels disconnected from fundamentals. Although Pachter rates the stock at Neutral, he has a price target of $ 16. GameStop stock was down 0.7% to $ 200.27 on Friday.
By now, many Americans know why. The GameStop stock has been widely criticized by Wall Street analysts, with the stock dropping around the price of a Happy Meal a year ago. It sparked obscene short interest, meaning that hedge funds were stand in line to bet on a price drop. But when short sellers get ahead of themselves, positive news can cause stocks to soar as they rush to buy stocks to close their bets in the face of an unlimited drop.
In the second half of last year, Chewy co-founder Ryan Cohen stepped into the mix. He revealed an issue and subsequently called for major changes. He increased his stake in December and joined the board in January with two partners.
Taking into account the short-lived interest in the action and the possibility that GameStop may find a second life as a gaming-focused e-commerce player, retail traders on Reddit’s WallStreetBets forum have piled into the crowd. ‘GameStop action. Technical quirks of the options business, the aforementioned short-term interest and new enthusiasm made GameStop action jump in January.
WallStreetBets grabbed national headlines and bearish hedge funds were torched. It also started a debate about short selling, as well as a debate about retail traders’ access to financial markets after Robinhood and other brokers temporarily restricted buying the shares due to financial demands of their clearing houses.
GameStop stock fell about $ 40, but jumped again last month. Although GameStop has been announced looking for a new CFO, a few Promising hires focused on e-commerce, and a board committee chaired by Cohen to guide itransformation into a technology company, it hasn’t provided a sales or outlook update since posting its holiday sales on January 11, which signaled a disappointing December.
For the full fiscal fourth quarter, Wedbush analyst Pachter forecasts sales of $ 2.3 billion, same-store sales up 4.8% year-over-year, and adjusted profit of 1 , $ 38 per share. He notes that GameStop’s holiday sales report showed comparable store sales were down year over year in December and lagged behind positive industry-wide data from NPD. He notes that the company has lost market share in recent periods to the benefit of its competitors amid a shift to Internet spending.
BofA Global Research analyst Curtis Nagle wrote in a Friday note that he expects a disappointing, albeit profitable, quarter. He wrote that while recent announcements about Cohen and new hires are positive, in theory there haven’t been any real details on the costs, timing, and earnings impacts of a turnaround plan. He has a price target of $ 10 with an underperformance rating, noting that the current valuation and historical multiple of the stock would imply earnings before interest, taxes, depreciation and amortization of $ 3.5 billion, or around four times its maximum EBITDA of 2015.
Nagle’s memo included an analysis of the impact of the $ 1,400 direct payouts on the stock, with the idea that retail investors will use their last windfall on GameStop stock. His conclusion is that “stimmies,” as he calls them, will not impact GameStop action in the future.
Of course, what analysts have said about the GameStop stock hasn’t had much of an impact on its recent moves. A positive update to the recovery plan could offset the remaining short-term declines. On the other hand, any comment on stock sale possible could be negative. Pachter expected short sellers to drop their bets as the stock returned to more fundamental levels. This did not happen, he noted.
“Activists control the company’s board of directors and lead activist Ryan Cohen, founder of Chewy, intends to unveil a new strategy in the near future,” Pachter added. “When the new strategy is revealed and we are able to evaluate it, we will re-examine our estimates and our PT.”
Editor’s Note: This article originally appeared during intraday trading on Friday afternoon and was updated on Saturday to reflect GameStop’s closing price. Due to a technical error, the timestamp indicates that this article was updated on March 22 instead of March 20.
Write to Connor Smith at [email protected]