Quaint as it sounds, there are still some who seem to actually care about GameStop’s business fundamentals.
Wall Street’s sell-side analysts have been largely silent since the video game retailer’s stock started soaring two weeks ago. But Curtis Nagle of BofA Securities braved the waters Wednesday with a rather bleak view of the actual business.
He writes that he remains “skeptical on the potential for a turnaround” and notes that the thesis of the company remaking itself into an e-commerce game destination has a big problem: used games.
“Very simply, the more business that shifts from in-store transactions, the more difficult it will be to sell high margin pre-owned and collectibles merchandise,” he writes, adding that such products accounted for about 46% of the company’s gross profit dollars in 2019.
Still, Mr. Nagle boosted his price target on GameStop’s stock from $1.60 to $10—an increase of more than six-fold, but still less than 3% of the stock’s current trading price. He still rates GameStop as an “Underperform” (equivalent to a sell), adding that “we think fundamentals will again factor into valuation.”
A leap of faith indeed.
This content was originally published here.