Videogame retailer
GameStop
unveiled a new strategy along with mixed third-quarter earnings.
The company’s board announced it would allow CEO Ryan Cohen to manage its portfolio of securities and start trading equities. Cohen, who took over as CEO in September and has served on board since January 2021, will act as an investment manager while running the business. He became involved with GameStop as an activist investor.
It’s “one of the most inane moves we have ever seen,” said Wedbush analysts Michael Pachter and Nick McKay. “The company’s decision to invest in equities other than its own is alarming, implying that GameStop management believes it will achieve better returns by buying equities aside from its own.”
On Thursday, shares were up 1.2%, to $15.02.
GameStop didn’t immediately respond to a request for comment. The company announced the move in its third-quarter results but didn’t provide additional details and didn’t hold a conference call.
Wedbush lowered its estimates for earnings per share and revenue in a note after the results on Wednesday and maintained an Underperform rating on shares, with a price target of $6. The price target is based on roughly $4 per share of cash in the company plus a going concern value of $2 per share.
As far as earnings went, Jefferies analysts led by Andrew Uerkwitz noted that GameStop had done a good job of keeping a lid on costs but the outlook for top-line revenue growth isn’t great. They have a Hold rating on the stock and lowered their price target to $15 from $20 on Wednesday.
Write to Brian Swint at [email protected]
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