GameStop’s Reddit-fuelled trading surge could plunge 94% as it faces growing competition from rival digital games, one Wall Street analyst says

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  • GameStop’s shares could tumble 94% on strong competition from rival digital games, one analyst said.
  • The Reddit favorite’s meme popularity will likely have less of a long-term impact on its stock, he said.
  • Edward Woo downgraded GameStop’s rating to “sell” from “hold” and lowered his 12-month price target.
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GameStop, the video-game retailer cheered by day traders this year, is likely to see its Reddit rally fade because of strong digital competition from Microsoft and Sony, Ascendiant Capital analyst Edward Woo wrote in a research note on Saturday.

Woo has raised questions about GameStop’s low market share in digital game sales and expects the company’s long-term share price to drop sharply.

He further said GameStop’s popularity on Reddit will at some point stop driving the movement in its stock.

“Due to the popularity of GameStop on Reddit chat boards and with Robinhood retail investors, GameStop shares appears to no longer trade on traditional fundamental valuations or metrics, but on retail investors’ sentiment, hope, momentum, and the powers of crowds,” he wrote.

“This makes short term price movement forecasts nearly impossible (and we acknowledge can drive shares much higher), but we believe that over the long run GameStop’s current elevated share prices will come back down to match its current weak results and outlook.”

Woo downgraded the company’s stock to “sell” from “hold,” and lowered his 12-month price target to $10 per share from $12.

GameStop didn’t immediately respond to Insider’s request for comment.

The company’s stock was up almost 4,000% from a year ago after it found itself at the center of a stock market storm between Reddit day traders and short-sellers.

Its shares were last trading 10% lower in the pre-market, at $141.09 per share on Tuesday, after GameStop was said to be looking for a new CEO to replace George Sherman, sources told Reuters.

News of the management shake-up followed Woo’s stock downgrade. The company is already going through wide “transformation” in culture and strategy under board member and activist investor Ryan Cohen.

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Why one Wall Street analyst doubts GameStop’s e-commerce turnaround plan, even with Ryan Cohen set to become chairman

  • GameStop’s plan to elect activist investor Ryan Cohen to become its chairman isn’t winning over Wall Street analysts.
  • CFRA Research reiterated its “sell” rating on GameStop and said plans to make Cohen chairman don’t change the fundamental story of the video game retailer.
  • Here’s why CFRA is still bearish on GameStop despite its e-commerce turnaround plan.
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GameStop is moving ahead with its turnaround plan to shift its selling strategy to e-commerce from physical stores, and its recently announced plans to elect activist investor Ryan Cohen as board chairman is part of that.

But one Wall Street analyst remains unconvinced that shares of GameStop present a good value for investors at current prices, and that GameStop can even pull off its turnaround plan.

CFRA Research analyst Camilla Yanushevsky reiterated her Sell rating on GameStop, arguing that the stock’s fair value is $16 rather than its current price of $177. That $16 price target represents 91% downside potential from its current price.

Yanushevsky was not surprised by GameStop’s decision to elect Cohen and said “little has changed in the fundamental story.”

The fundamental story, according to Yanushevsky, is the fact that GameStop was the only member of its peer group to post negative sales growth in its fiscal year 2020 despite the backdrop of thousands of dollars in stimulus checks and a surge in video game activity amid the pandemic. GameStop’s comparable store sales fell 9.5% to $5.1 billion last year.

“We hold concerns over [GameStop’s] ability to maintain competitive positioning due to [its] high dependence on brick-and-mortar and consumers’ shift away from physical to digital,” Yanushevsky said.

Further adding to Yanushevsky’s concerns on GameStop is the fact that it was the only member of its peer group to not provide earnings guidance for the upcoming year.

Investors seemed to also not view Cohen becoming chairman of GameStop’s board as a surprise. Shares initially rose 4% on the news, but eventually traded about flat in Thursday trades.

Read more: Goldman Sachs handpicks 40 stocks that will enjoy bigger earnings growth than Wall Street expects in 2021

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GameStop pares early gains after saying it plans to elect Reddit favorite Ryan Cohen as chairman

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GameStop shares rose on Thursday after the company announced it intends to elect activist investor Ryan Cohen as chairman, but quickly pared their gains.

The video-game retailer also nominated five other people for the board – including private equity executive Larry Cheng and Kraft Heinz senior vice president Yang Xu – as it tries to reinvent itself as an e-commerce force.

GameStop’s board also appointed one of those nominees, Jim Grube, to serve on the strategic planning committee. Grube was chief financial officer at Chewy, the online pet supply retailer founded by Cohen.

Voting on the board nominees will take place at the company’s annual meeting of stockholders on June 9, the company said in a statement before markets opened.

Cohen has become an increasingly powerful figure at GameStop in recent months. The billionaire’s RC Ventures first invested in GameStop in September 2020, and is one of the biggest shareholders.

GameStop stock opened around 4% higher but quickly fell back. It stood 0.44% lower at $177.38 at 10.10 a.m. ET.

Cohen was first appointed to the board in January, which analysts have cited as one of the catalysts for the dramatic rise in the stock which captured the markets’ attention at the start of the year.

He has since seized control of the company’s strategy, hiring numerous executives with backgrounds in online retailing in an effort to turn the flagging company around.

On Monday, GameStop said it plans to sell as many as 3.5 million shares to raise up to $1 billion to help fund Cohen’s transformation plans.

Separately on Monday, GameStop said preliminary global sales during the first nine weeks of fiscal 2021 increased by about 11% from the period a year earlier.

Read more: Goldman Sachs handpicks 40 stocks that will enjoy bigger earnings growth than Wall Street expects in 2021

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GameStop climbs as Ryan Cohen-led revamp continues with hire of Amazon exec as chief growth officer

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  • Shares of GameStop rose 5% on Tuesday after the company announced the appointment of Elliott Wilke as chief growth officer.
  • Wilke will join the company on April 5 after a seven-year stint with Amazon.
  • GameStop also named Andrea Wolfe as vice president of brand development and Tom Petersen as vice president of merchandising.
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Shares of GameStop rose 5% on Tuesday after the video game retailer announced the appointment of Elliott Wilke as chief growth officer, boosting the company’s to pivot to e-commerce driven by board member and former Chewy CEO Ryan Cohen.

Wilke will join the company on April 5 after a seven-year stint with Amazon where he held senior roles in Amazon Fresh, Prime Pantry, and Worldwide Private Brands. At GameStop, he will oversee growth strategies and marketing, with a focus on increasing customer loyalty.

GameStop also named Andrea Wolfe, former Chewy vice president of marketing, as vice president of brand development, and Tom Petersen, former Chewy vice president of merchandising, as vice president of merchandising. Both executives started on March 29.

Cohen has been vocal about turning the video game retailer that was at the center of the Reddit-trader phenomenon into an e-commerce powerhouse.

GameStop, “needs to evolve into a technology company that delights gamers and delivers exceptional digital experiences,” Cohen wrote in the letter, “not remain a video game retailer that overprioritizes its brick-and-mortar footprint and stumbles around the online ecosystem.”

The Grapevine, Texas-based company earlier in March also named Jenna Owens, a former Amazon executive, as chief operating officer. Owens also used to work at Google.

GameStop’s appointment of Wilke and other industry veterans marks yet another recruitment by the once-struggling video game retailer ever since the mania in January. The company-which sells video game hardware, video game accessories, electronics products, among others-found itself suffering as more people download games, significantly reducing customer footprint in physical stores.

Despite the massive hype, the video game retailer’s fourth-quarter earnings last week missed Wall Street’s estimates in the first financial report since the Reddit-driven rally.

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GameStop is almost six times more volatile than bitcoin as earnings results jolt retail belief in a turnaround

Traders work on the floor of the New York Stock Exchange (NYSE) on March 16, 2020 in New York City

  • Shares of GameStop have been nearly six times more volatile than bitcoin, according to data from Bespoke Invest.
  • Over the past 50 days, GameStop has had an average daily price move of 21% compared to just 4% for bitcoin.
  • GameStop was especially volatile over the past week as investors digested its earnings report.
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Shares of GameStop have been subject to extreme volatility over the past few months that far surpasses the price swings of bitcoin, according to data from Bespoke Invest.

Over the past 50-days, the daily average percentage move in shares of GameStop stands at 21%, compared to just 3.6% for bitcoin, according to Bespoke.

Volatility has skyrocketed for bitcoin following the epic January short-squeeze that saw its shares hit an all-time high of $483, and it has remained heightened as investors continue to grapple with the company’s e-commerce turnaround plans led by activist investor Ryan Cohen.

GameStop’s Tuesday earnings report gave investors a lot to grapple with as results missed analyst expectations. The stock saw a subsequent price decline of 34% on Wednesday, followed by a 53% rebound on Thursday as the stock found technical support at its 50-day moving average.

Bitcoin has also seen some choppy trading in recent weeks, as it hovered just below its all-time-high of about $60,000 for most of March. The cryptocurrency was down as much as 7% on Thursday, but has since bounced off the key $50,000 level.

How long the heightened volatility will last in GameStop is anyone’s guess, but if CFRA’s $16 bear case plays out, it could be a while.

“And you thought bitcoin was volatile,” Bespoke said.

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GameStop has fallen nearly 50% from March intraday highs, but ‘diamond hands’ Reddit traders are still holding

Day traders piled into GameStop stock in January, alerting Wall Street to the power of amateur investors

GameStop stock has fallen nearly 50% from March 10 intraday highs of $348.40, but that hasn’t stopped Reddit traders from holding the stock.

Traders on the popular r/wallstreetbets forum are doubling down their bets on the beleaguered video game retailer despite falling short interest and share prices.

GameStop stock was down as much as 20% on Tuesday before it mounted a recovery. Short interest in the stock has dropped to just 15.77% of its float as of March 16, according to data from Ihor Dusaniwsky of S3 Partners.

Even in face of the bearish news, Reddit traders continued to comment about their “diamond hands” on the GameStop thread of r/wallstreetbets for Tuesday, March 16, referring to investors who hold a stock or cryptocurrency regardless of potential risks, headwinds, or losses. The term is used to represent a group of retail traders’ collective strength in the markets if they act in unison.

A Reddit user going by the name u/darkspherei commented on the March 16 GameStop thread, “upvote if you ain’t selling 💎🙌🦍🚀,” and quickly received nearly 3,000 upvotes.

The online community is attempting to band together once again to “defend” GameStop.

Another commenter on the site going by u/_exordium argued the forum can create a repeat of February’s rise in prices if they band together.

“Don’t forget, in January once it tanked, we all quieted down for a while, but we never f—-‘ left and we never f—-‘ sold. When this place is overrun by FUD and shills, we wait…Hang the f— in there,” u_exordium said.

Despite the rallying cries, and the recent appointment of Chewy co-founder Ryan Cohen to lead a digital shift at the company, shares of GameStop traded down 10.79% as of 11:44 a.m. ET on Tuesday.

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GameStop jumps 14% to resume its climb back to post-short-squeeze levels even as Wall Street recommends ‘sell’

GameStop millionaire Roaring Kitty
GameStop millionaire Roaring Kitty

  • GameStop surged as much as 14% on Friday as it resumed its push to levels not seen since after the epic short-squeeze earlier this year.
  • But Wall Street is not on board with the move, with the average analyst rating remaining a “sell.”
  • “We believe [the] rapid rise up in shares is unwarranted, less about future prospects, and more of a statement about social & economic inequality,” CFRA said in a note on Wednesday.
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The meteoric rise in shares of GameStop continued on Friday, as the video game retailer surged as much as 14% on no official news.

In recent weeks, GameStop has gravitated towards the highs following its late January short-squeeze that saw shares briefly topped out at $483. On Friday, the stock hit a high of $295.50, giving it a market valuation of about $17 billion.

GameStop investors have latched on to the idea that activist investor and Chewy co-founder Ryan Cohen can transform the company into a specialized e-commerce company, and so has the board of directors. Earlier this week, GameStop said Cohen would lead a committee focused on expanding GameStop’s e-commerce capabilities.

But Wall Street analysts remain unconvinced and are sticking with their price targets that suggest more than 90% downside potential in the company.

CFRA maintained its Sell rating on GameStop but increased its price target to $16 from $7, according to a Wednesday note. CFRA highlighted that “no material changes” to its business model were conveyed in the recent announcement about Cohen leading a committee.

“We believe [the] rapid rise up in shares is unwarranted, less about future prospects, and more of a statement about social and economic inequality,” CFRA said, before drawing parallels to the 2011 Occupy Wall Street Movement and the recent rise in Reddit’s WallStreetBets forum.

“In our view, we’re witnessing a ‘Reoccupy GME’ movement, following Feb’s splintering off into silver, dogecoin, and other financial instruments,” CFRA said.

The Wall Street research firm said bearish catalysts that could weigh on GameStop’s share price going forward include earnings on March 23 and “developments in regulatory probe opposing investors,” according to the note.

CFRA isn’t alone in its bearish view on GameStop. Bank of America reiterated its Sell rating on the company on Friday, and the average Wall Street analyst rating on the company remains Sell.

But those bearish views aren’t stopping investors from piling into the stock, which is up 1,280% year-to-date as of Thursday’s close.

Read more: Buy these 30 stocks poised to lead an electric-vehicle revolution that will account for 50% of new-car sales by 2030, UBS says

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GameStop stock hit with 6 trading halts as volatility spike results in $176 daily trading range

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GameStop has been the centre of markets’ attention this week

Shares of GameStop experienced a wild trading session on Wednesday reminiscent of the late January short-squeeze that sent shares flying and led to a congressional hearing.

GameStop traded up as much as 41% in afternoon trades with no official news from the firm. The move higher was likely an extension to news earlier in the week that activist investor Ryan Cohen would be leading an initiative to transform the video game retailer into a specialized e-commerce company.

But at around 12:20 a.m., selling in GameStop picked up and the stock plummeted as much as 51% from its intra-day high to $172. Amid the decline, the stock was hit with as many as 6 trading halts before shares recovered.

The $176 trading range in GameStop on Wednesday highlights the heightened volatility that has hit so-called meme stocks ever since Reddit’s WallStreetBets forum began to have an outsized influence on retail investors’ trading activity.

Other stocks like Koss Corp and AMC Entertainment traded up as much as 100% and 55% in Wednesday trades, respectively.

Another round of $1,400 stimulus checks might sustain the volatility in the meme-stocks given that a bulk of people said they would save or invest the funds rather than spend them, according to a recent Bank of America survey.

Shares of GameStop traded up about 2% as of 3:12 p.m.

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GameStop rallies above $200 for the first time in a month as transition steps attract new bulls

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  • GameStop rose as much as 19% on Tuesday, climbing above $200 for the first time since February 1.
  • The retailer’s shares have rallied in recent days as its transition to e-commerce business picks up steam.
  • GameStop announced Monday that Chewy founder Ryan Cohen will head a committee tasked with leading the firm’s transformation.
  • Watch GameStop trade live here.

GameStop climbed for a fifth straight day on Tuesday, signaling investors bullish toward the company’s overhaul are sticking to their guns instead of playing the stock for quick profits.

Shares rose as much as 19% and landed above $200 for the first time since February 1. While the level remains well below the $483 peak seen during January’s trading frenzy, shares are still up more than 900% year-to-date and about five times higher than where they stood mid-February.

The upswing follows larger gains made Monday after the company announced board member and Chewy founder Ryan Cohen will head a planning committee meant to usher in GameStop’s transformation. Cohen said in a November letter that the video-game retailer needs to focus on e-commerce business and lean less on physical locations if it’s to survive.

Steps taken since suggest GameStop heeded Cohen’s warning. The company hired Amazon veteran Matt Francis to serve as its new chief technology officer in February. The transition committee is now tasked with hiring leaders for its e-commerce fulfillment and customer care arms, as well as find a new chief financial officer.

The group will also seek opportunities for transforming GameStop into a “technology business” and creating value for shareholders, the retailer said in a press release.

The announcement marks a new phase to the mania around GameStop stock. Shares famously shot higher in January as casual investors uniting online flooded the market with buy orders.

That phenomenon has mostly died out, but participating Reddit traders have replaced their calls of “GME to the moon!” with research into how GameStop can thrive as an e-commerce firm. The crude commentary, memes, and bragging about claimed windfalls remain.

Even Keith Gill, arguably the group’s most famous GameStop bull, has cheered on the latest rally. The investor, known online as RoaringKitty and DeepF***ingValue, posted an update to his position on Monday. The one-day rally allegedly fueled an $8.5 million profit, bringing his total gain to $25.8 million.

Gill gained notoriety online for his early bullishness toward GameStop. Fame gained during the January surge led to his testifying to the House Financial Services Committee on the matter last month.

GameStop closed at $194.50 on Monday. The company has two “buy” ratings, two “hold” ratings, and three “sell” ratings from analysts.

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GameStop spikes 14% after announcing board member Ryan Cohen will lead its transition to e-commerce

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Shares in GameStop rose 14% in regular trading Monday after the company announced board member and Chewy founder Ryan Cohen will lead its strategic transformation.

Cohen has been appointed chairperson of a planning committee that aims to transition the company to an e-commerce business. Members of the committee include Alan Attal, Kurt Wolf, and Cohen himself.

Cohen has been actively pushing for the company to gravitate away from its traditional brick-and-mortar model to an Amazon-like e-commerce titan.

Since the committee’s formation, they appointed Amazon vet Matt Francis as CTO, hired two executives to lead the customer care and e-commerce fulfillment functions, and have been seeking a replacement for prior CFO Jim Bell. Bloomberg reported earlier on Monday Cohen would be tapped for the role.

Shares in GameStop rose more than 1,600% in January after a wave of Reddit-fuelled retail traders rebelled against Wall Street hedge funds that were betting against the stock. 

Shares were up as much as 14% in regular trading at $157.05 per share.

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