GameStop Slides Following Earnings As Possible Share Sale Discussed

Additionally, GameStop said it has named former Amazon (AMZN) and Google (GOOG) executive Jenna Owens as its new chief operating officer.  

TARGET HIKED TO $175 AT JEFFERIES:

 While keeping a Hold rating on the shares, Jefferies analyst Stephanie Wissink raised the firm's price target on GameStop to $175 from $15. The analyst believes the company's fourth-quarter results "reflected the directional changes underway in the business model," with comp sales up 6.5% and e-commerce sales were up 175%. Wissink is recasting her GameStop model and valuation for the additional shift toward e-commerce and digital and affiliated value streams. The analyst expects store closures to persist and sales to transfer to dot-com. Upon closure, she estimates 40% of volume transfers to gamestop.com or nearby stores. While total revenues may come down, value per dollar of sales "should increase if non-retail streams are realized," Wissink contended.

Baird analyst Colin Sebastian also raised the firm's price target on GameStop to $25 from $13, keeping a Neutral rating on the shares. GameStop's report was mixed, as total sales and profit margins missed expectations but demand still exceeds supply for console hardware, which extends "a lifeline to the company" while management implements a strategy to transition from legacy physical retail to a technology-oriented e-commerce model, Sebastian told investors in a research note. The analyst believes the shares are currently pricing in an "optimistic 'bright blue sky' scenario," including close to an e-commerce multiple on physical retail sales. Further, he believes the stock's near-term performance and is being "influenced by external factors."

SELL GAMESTOP:

 More bearish on the name, Wedbush analyst Michael Pachter downgraded GameStop to Underperform from Neutral with a price target of $29, up from $16. The analyst noted that quarterly results fell below expectations due to COVID-19 mandated closures, shipping constraints during the holidays and severe supply limitations of new generation consoles. Patcher believes GameStop is well-positioned to be a primary beneficiary of the new console launches, and remains "quite optimistic" that it will return to profitability by the end of fiscal 2021. However, the "high-profile sustained short squeeze" has spiked the share price to levels that are "completely disconnected from the fundamentals of the business," the analyst added.

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