Recording strong gains, shares of GameStop Corp. (NYSE: GME) surged 14.5% to close at $141 a piece on Wednesday after climbing over 30% on Tuesday. The jump in price followed the revelation of further stake bought by billionaire Ryan Cohen in the American video game, consumer electronics, and gaming merchandise retailer.
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Cohen, the co-founder of pet-supplies retailer Chewy, Inc. (CHWY) and chairman of GameStop, boosted its ownership stake to 11.9% in the company through his investment firm, RC Ventures. According to a securities filing, he bought shares in the price range of $96.81 to $108.82 per share, with 9.1 million shares now owned.
Cohen tweeted, “I put my money where my mouth is.”
Cohen, who has plans to turn GameStop into a successful e-commerce company, has not announced a substantial turnaround plan but seems to be on the verge of launching an NFT marketplace by the end of the second quarter.
BCG Accusations
Separately, per a Bloomberg report, Boston Consulting Group (BCG) has filed a lawsuit in Delaware federal court claiming that GameStop has not paid about $30 million in fees for its services provided for “setting the company on a more sustainable path” in 2019.
GameStop considers the suit without merit reflecting BCG’s “prioritization of excessive fees over clients’ interests.” The company has decided to fight the suit.
GameStop e-mailed saying, “It is confounding that the high-priced consultants at BCG claim to have delivered hundreds of millions in value for GameStop during a period when share price, sales and debt were at perilous levels.”
Wall Street’s Take
Following the disclosure of Cohen’s stake purchase in GameStop, Wedbush Securities analyst Michael Pachter maintained a Sell rating and a price target of $30 (78.72% downside potential) on the stock.
Patcher said, “They should have enough cash to support two years of burn, but I would expect a capital raise by year end if they keep burning $100 million or more per quarter.”
The rest of the Street is bearish on the stock, with a Moderate Sell consensus rating based on one Hold and two Sells. The average GameStop price target of $51 implies a 63.83% downside potential from current levels. Shares have increased 17.17% over the past year.
Estimated Monthly Visits
TipRanks’ Website Traffic Tool, which uses data from SEMrush Holdings (SEMR), offers insight into GameStop’s performance.
According to the tool, the GME website recorded a 36.87% and 30.56% decrease in global estimated visits in January and February, respectively, on a sequential basis. Also, year-to-date website growth, compared to year-to-date website growth in the previous year, came in at a decline of 40.61%. This, in turn, indicates that the company’s revenues and profitability might remain in murky waters going forward.
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