The massive short squeeze in late January briefly propelled the stock to absurd highs, and saw the price correcting sharply soon thereafter. However, for seemingly lesser reasons, GameStop Corp.’s (GME) share price has continued to intermittently spike and climb as retail investors pile in, hoping for another fundamental-shattering rise. (See GME Stock Analysis on TipRanks)
Michael Pachter of Wedbush Securities published an April 27th report detailing his less optimistic perspective on the phenomenon, rating GameStop a Sell, and assigning a price target of $39. At the time of his writing, GameStop was at $180.25 per share, although about a month later, on Wednesday May 26th, the stock closed at $240.50 after a blistering gain of +34.53% from two days of trading. Pachter’s 12-month price target represents an 83.92% downside potential.
On TipRanks, Pachter is a four-star analyst, ranked as #1,119 out of 7,524 on the website. GameStop has an average analyst rating consensus of Moderate Sell, based on 2 Hold and 4 Sell ratings. The stock’s average analyst price target is currently $55.80.
Michael Pachter delineated several reasons why the company and its situation have been improving, including the launching of new gaming consoles, the completion of an at-the-market equity offering, and major executive changes.
Pachter further explained that by issuing 3.5 million shares of stock, GameStop successfully raised $551 million. Using these funds, the company wishes to shift to a more digital-retail presence, as well as to strengthen its balance sheet.
GameStop had been hit hard by forced retail store closures during the COVID-19 pandemic. In order to “de-densify the store footprint,” the outgoing CEO had successfully closed 693 retail storefronts during 2020 alone. This move reduced nearly $400 million in expenses year-over-year.
Due to the positive changes explained above, Pachter raised his price target from $29 to $39, which still remains overwhelmingly bearish from the current stock price.
Michael Pachter admitted that GameStop’s volatile price fluctuations will provide for some investors to “profit handsomely,” but was firm in his analysis that the share price is “completely disconnected from business fundamentals.”
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
