Wedbush Securities chief technology strategist Brad Gastwirth shows whether it is worth investing in GameStop.
GameStop Corp. shares plummeted on Wednesday after the company refused to answer questions about its e-commerce campaign and said it was considering selling shares to finance its transformation.
| Ticker | Safety | Last | Change | Change % |
|---|---|---|---|---|
| GME | GAMESTOP | 120.33 | -60.78 | -33.56% |
Shares of GameStop, based in Grapevine, Texas, rose 865% this year through Tuesday, driven by a small squeeze that developed after RC Ventures, a venture capital firm owned by Ryan Cohen, founder of online retailer of pet food Chewy has amassed a large stake with the hope of reshaping the video game retailer into an e-commerce retailer with rapid modeling.
“GameStop is the only scale retailer exclusively focused on the gaming industry and adjacent categories,” said GameStop CEO George Sherman in the company’s fourth quarter conference call. “We have a unique opportunity to become the ultimate destination for players.”
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The company plans to expand its product catalog on PC games, computers, monitors, gaming tables, mobile games and gaming TVs, among other areas.
The plan to expand GameStop’s offerings comes at a time when its business has suffered in recent years, as more customers choose to buy their video games online. The deal was also hurt because physical locations were forced to temporarily close in the midst of the COVID-19 pandemic,
The company reported an adjusted net loss of $ 138.8 million for fiscal year 2020, down from an adjusted profit of $ 19.1 million the previous year. Net sales decreased 21%, to US $ 5.090 billion.
Despite the continued decline in business, the company has provided some evidence that its recovery plan may be working.
- Global e-commerce sales increased 191% year-over-year in fiscal 2020, fueled by the online shopping boom that developed in the wake of the pandemic. Online sales represented 29% of total net revenue, a low one-digit percentage over the previous year.
- GameStop also reported a $ 400 million reduction in selling, general and administrative expenses as a result of its optimization efforts. The company closed a network of 693 locations to help accelerate its transformation.
The cost savings helped to “materially reduce overall debt,” said Sherman. He noted that the company is exploring its options for its European businesses, which could include more store closings and exits from unprofitable businesses.
However, the company did not allow analysts to ask questions about the new initiative.
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Providing investors with more concerns was a document that said GameStop could sell shares to capitalize on the high share price.
“It appears that the ‘real’ value of GameStop shares (the price that buyers are willing to pay on the open market) far exceeds the ‘fundamental’ value that we believe investors who expect a financial return can reasonably expect,” he wrote. Wedbush analyst Michael Pachter. . He increased his price target from $ 16 to $ 29 due to “excellent execution by the past and current management”.