‘No Turnaround in Sight,' Says Wedbush About GameStop Stock

Business Insider

20 hours ago

GameStop (NYSE:GME) is known for its fanbase of rabid retail investors, but the love is not one the company seems to reciprocate. For the past three years, the struggling video game retailer has failed to hold a conference call or provide guidance when releasing quarterly reports.
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With the company poised to report F1Q25 results tomorrow (June 10), Wedbush analyst Michael Pachter expects 'no improvement in their attitude toward investors.'
But what about the actual results? For the quarter, Pachter expects net sales of $750 million, representing a 14.9% year-over-year drop, and EPS of $0.08. That compares to consensus expectations of $754 million and $0.04, respectively. Industry-wide, both hardware and software sales declined y/y, though software held up better thanks to a strong release lineup during the quarter. Hardware sales saw a sharp y/y downturn, largely because the PS5 and Xbox Series X/S have been on the market for several years now. However, Pachter expects hardware demand to rebound next quarter with the launch of the Switch 2. In Q1, profits should get a boost from a stronger software mix, while higher interest income – driven by recent share offerings – will help offset ongoing operating losses.
Taking a leaf out of the MicroStrategy playbook, GameStop has also begun accumulating Bitcoin and now owns 4,710 BTC. That said, MicroStrategy trades at roughly 1.75 times the value of its Bitcoin holdings, indicating that investors assign it a premium beyond just its crypto assets. In comparison, GameStop trades at about 2.4 times the value of its cash, which now includes Bitcoin. This suggests investors are giving GameStop a similar kind of Bitcoin-related premium, even though its core retail business is being implicitly valued at just $8 per share. What Pachter finds 'baffling' is that GameStop's Bitcoin holdings are tiny compared to MicroStrategy's – just about 1% as much. Yet both stocks are receiving similar levels of crypto-related investor enthusiasm.
While GameStop has seen some 'modest success' with its move into trading cards, Pachter thinks there's 'no potential for a rebound in GameStop's core business,' but that hasn't really mattered here.
'Despite a complete lack of an articulated strategy, GameStop has consistently been able to capitalize on the existence of 'greater fool' willing to pay more than twice its asset value for its shares—and so far, they've been right,' Pachter said. But in his view, GME shares are trading 'at a level that ignores the company's many challenges ahead.'
As such, ahead of the print, Pachter rates GME shares an Underperform (i.e., Sell), along with a $13.5 price target, suggesting the shares will shed 54% of their value over the next year. (To watch Pachter's track record, click here)
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