However, this strategy has raised concerns among industry experts. Wedbush analysts Michael Pachter and Nick McKay consider it to be “one of the most inane moves we have ever seen.” They find GameStop’s decision to invest in equities other than their own quite alarming, indicating that the management believes better returns can be achieved by purchasing equities unrelated to their core business.
Despite requests for comment, GameStop has not yet responded. The company included the announcement of this move in its third-quarter results but did not provide any further details and also did not hold a conference call.
Wedbush has revised down its estimates for earnings per share and revenue, ultimately maintaining an Underperform rating on GameStop shares with a price target of $6. This price target considers the cash reserves of approximately $4 per share within the company and an additional value of $2 per share based on its ongoing operations.
In Thursday’s trading, GameStop shares were down by 8.7% at $13.54.
Regarding earnings performance, Jefferies analysts, led by Andrew Uerkwitz, acknowledged that GameStop effectively managed costs. However, they expressed concerns about the outlook for top-line revenue growth. Consequently, they have a Hold rating on the stock and reduced their price target from $20 to $15 on Wednesday.