Gamestop's Price Target Raised 25% by Wedbush Analyst Despite Sell Rating

Wedbush's Michael Pachter raised their price target on Gamestop (NYSE: GME) by 25% from $5.6 to $7 on May 17, 2024. The analyst maintained their Sell rating on the stock.

In their latest report, Gamestop issued preliminary earnings results for Q1 2024, which ended on May 4, 2024. The company's revenue range of $872M to $892M fell short of Wedbush's estimate of $1B and the consensus estimate of $1.045B, according to Pachter.

Pachter highlighted Wedbush's belief that Gamestop's hardware sales will further decline due to Sony's guidance on PS5 unit sales. Sony has projected 18 million unit sales for FY 2024, down from the reported 20.8 million units in 2023 and below the initial estimate of 25 million units.

Additionally, Pachter noted that Wedbush predicts a decline in physical sales following reports that the next installment of Call of Duty will be available exclusively on Game Pass. This development could impact Gamestop's sales figures.

The analyst also mentioned that Gamestop is taking advantage of the recent spike in share price by prudently issuing shares at a premium. This move allows the company to build up reserves while it focuses on restructuring its business and reversing its operating losses.

Regarding the price target, Pachter explained that it reflects approximately $5.50 per share of net cash, along with a going concern value of around $1.50 per share.

Currently, none of the top-rated analysts rate GME as a Strong Buy or Buy, and none see it as a Hold. In fact, 100% of the analysts either recommend or strongly recommend selling the stock.

Looking at GME's stock performance, since its last quarterly report on February 3, 2024, the stock price has increased by 50.8%. However, on a year-over-year basis, the stock is down 2.9%. During this period, GME has been underperforming the S&P 500, which has experienced a decline of 27.5%.

Michael Pachter, the Wedbush analyst who issued the new price target, is ranked in the top 21% of Wall Street analysts by WallStreetZen. With an average return of 2% and a win rate of 50.3%, Pachter specializes in the Communication Services, Technology, and Consumer Cyclical sectors.

GameStop Corp. is a retailer of video games, consumer electronics, and gaming merchandise. Operating both in the U.S. and internationally, the company owns various brands such as GameStop, EB Games, EB Games Australia, Micromania-Zing, ThinkGeek, and Zing Pop Culture. GameStop also publishes Game Informer, a well-known video game magazine. Founded in 1984 as Babbage's, the company is headquartered in Grapevine, Texas.

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