GameStop’s Tumult lives on with $ 6.4 billion rollercoaster trip

(Bloomberg) – GameStop Corp. ends the week lower than where it started, even after retail investors refused to let go of their commitment to the stocks following a profit-related sell-off.

Investors were quick to overcome GameStop’s 12th consecutive quarter of slowing sales and management’s decision not to answer questions about Tuesday’s earnings call, despite warnings from most Wall Street analysts. On Thursday, stocks spiked the profit-induced slump. More than $ 6.4 billion in market value was hit from Monday’s intraday high of $ 210.36 to a low of $ 118.62 on Wednesday.

That tumultuous ride lives on as the week draws to a close. The stock initially jumped a whopping 19% on Friday, before erasing gains to drop a whopping 11%. After a swing between gains and losses, the stock fell 6.9% to $ 171 as of 2:21 pm in New York. Shares are up about 800% so far this year, compared to a gain of 4.6% for the S&P 500.

GameStop bulls gravitate towards the constant turmoil of activist investor and board member Ryan Cohen. Cohen has become a cult-like figure for investors populating social media platforms like Twitter and Reddit, and his attempt to turn the retailer into a tech giant has amassed hordes of avid merchants.

Analysts warned that fundamentals matter little to investors and that the company’s overhaul faces significant challenges.

“The turnaround will be extremely difficult for GameStop to deliver and right now stocks are behaving as if they have already been successful,” said Edward Moya, senior market analyst at Oanda. “The GameStop stock party is going on longer than anyone expected, but should end up trading less than $ 100 a share.”

Total trading volume during Thursday’s rebound exceeded the cumulative activity seen during the three-day sell-off, meaning that investors eager to buy the dip and trade on the way up were much larger than sellers who wanted to cash out or short after a profit. the shares. The retailers eager to talk their diamond hands down cheered as the company continued to make board changes and recruit industry veterans to reshape the business.

Other stocks that gripped retailers were also choppy on Friday after breaking losing streaks alongside GameStop. AMC Entertainment Holdings Inc. fell 5.9%, reversing an initial jump of 5.4%, while headphone maker Koss Corp. 23% fell.

The group of meme shares continued to be unloved by Wall Street analysts covering the companies. GameStop is not recommended by any analyst and has three holdings and four sales ratings – with the average price target implying a drop of more than 70%. While AMC has no buys, five holdings and four sales ratings, and an average 12-month target that’s two-thirds below Friday’s level.

Wedbush analyst Michael Pachter, who rates GameStop as substandard, said in an email that the lack of a question-and-answer portion during his earnings call was a “bad look.”

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

“Changes in leadership at the board, executive and operational levels are signals of a complete overhaul of GameStop’s business model,” Wissink wrote in a March 24 report. She noted that stocks “are subject to volatility beyond fundamental factors.”

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

(Updates share movement everywhere, adds Wedbush comment in 10th paragraph.)

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