GameStop Takes $ 6 Billion Round Trip When Results Are Ignored

(Bloomberg) – GameStop Corp. is ending the week close to where it started, after an earnings-related selloff quickly reversed, and retail investors refused to abandon their commitment to the shares.

Investors were quick to overcome GameStop’s 12th consecutive quarter of slowing sales and management’s decision not to respond to questions about its results on Tuesday, despite warnings from most Wall Street analysts. More than $ 6.4 billion in market value shifted from the intraday high on Monday to a low of $ 118.62 on Wednesday.

That tumultuous journey lives on as the week draws to a close. The stock initially rose as much as 19% on Friday before erasing gains and falling as much as 4.2%. It has now advanced about 3.9% $ 191 at 11:45 am in New York. The shares are up about 850% year-to-date compared to a 4.5% gain for the S&P 500.

GameStop bulls are leaning on activist investor and board member Ryan Cohen’s ongoing restructuring. Cohen has become a cult figure for investors populating social media platforms like Twitter and Reddit, and his drive to turn the retailer into a tech giant has amassed hordes of eager merchants.

Analysts cautioned that fundamentals matter little to investors and the company’s review faces considerable challenges.

“It will be extremely difficult for GameStop to deliver on the story of change and at this point stocks are acting as if they have already succeeded,” said Edward Moya, senior market analyst at Oanda. “The GameStop stock party lasts longer than expected, but it should eventually trade below $ 100 a share.”

Total trading volume during Thursday’s rebound outpaced cumulative activity seen in the three-day selloff, meaning investors who were eager to buy the dip and trade on the way up were much larger than sellers who they were looking to cash in or sell stocks short after the profit hit. . Retailers who love to talk with their diamond hands cheered as the retailer continued to make changes to its directory and attracted industry veterans to help reshape the business.

Other stocks that have captivated retailers were more bumpy on Friday morning after breaking losing streaks alongside GameStop. AMC Entertainment Holdings Inc. fell 4.6%, reversing an initial jump of 5.4%, while headphone maker Koss Corp. sank 16%.

Wall Street analysts covering companies inadvertently follow the stock group of memes. GameStop is not recommended by any analyst and has three holds and four sell ratings, with the average price target implying a 77% drop. While AMC has no purchases, five holds and four sell ratings and a 12-month average target that is nearly 70% below Thursday’s close.

However, at least one GameStop analyst pushed his price target to stand out from a sea of ​​skeptics. Jefferies’ Stephanie Wissink, who rates the stock on hold, raised the company’s price target to a Wall Street high of $ 175 from $ 15, citing the ability to rival its digital peers if its transformation is successful.

“Changes in leadership at the board, executive and operational levels are signs of a total reinvention of the GameStop business model,” Wissink wrote in a March 24 report. He noted that stocks are “subject to volatility beyond fundamentals.”

It’s worth noting that the Grapevine, Texas-based retailer has been considering whether it should sell new shares and possibly increase the size of a current program to sell shares at prevailing market prices. The company signed an agreement in December with Jefferies to sell up to $ 100 million in stock, according to a document. However, that deal was reached when the shares were worth less than 10% of their current value. A Jefferies spokesperson was not immediately available for comment.

(Updates share movement at all times, add more details from the tenth paragraph on).

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