Shares of GameStop Corp. popped 16% in Monday’s pre-market session after RC Ventures, led by activist investor Ryan Cohen, ramped up his stake in the video game retailer to 12.9%. Shares jumped 40% in the five trading days to Dec. 24.
According to an SEC filing, Cohen purchased 2.5 million GameStop (GME) shares between Dec. 15 and Dec. 18, at an average price of about $14.80 per share for an aggregate $37 million. The stock last closed at $20.15. As a result, RC Ventures now owns 9 million GameStop shares.
RC Ventures intends to “continue to engage, in discussions with the Issuer’s Board of Directors regarding means to drive stockholder value, including through changes to the composition of the Board and other corporate governance enhancements,” the company stated in the SEC filing.
At the same time, the activist investor cautioned that it “will not hesitate to take any actions that they believe are necessary to protect the best interests of all stockholders.”
Earlier this month, GameStop reported lower-than-expected 3Q sales and announced a stock sale plan. The company’s revenue declined 30.2% to $1 billion year-on-year and lagged analysts’ expectations of $1.09 billion. Adjusted loss per share widened to $0.53 from $0.49 in the year-ago period but came in ahead of the Street’s estimates of a loss per share of $0.85. Additionally, the video game retailer announced a sale agreement with Jefferies LLC to sell up to $100 million of its class A common stock.
GameStop shares have spiked 241% this year, while analysts have a cautiously bearish outlook on the stock. Out of the 6 analysts covering GME, 3 rate it as Hold, and 3 say Sell, giving the stock a Moderate Sell consensus. (See GME stock analysis on TipRanks).
Following this year’s rally, the average price target of $8.52 suggests shares are poised to pull back 58% over the coming year.
Meanwhile, Wedbush analyst Michael Pachter on Dec. 9 reiterated a Hold rating on the stock with a Street-high price target of $16, saying that the recent share bonanza makes it unlikely that he will increase his PT until there is more clarity post-pandemic.
“We are cautiously optimistic that GameStop has the right management taking the right steps to address all of the unknowns ahead, and are significantly more positive on the story than we have been over the past year,” Pachter wrote in a note to investors. “The global pandemic will likely remain a hurdle until the majority of GameStop’s addressable market is vaccinated, which we expect around mid-2021.”
“We have a positive bias and think the company is positioned to generate solid profits in 2021 and beyond, but until we have greater visibility, we are unprepared to upgrade,” the analyst summed up.
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