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A Wedbush analyst cut the price target on GameStop (NYSE:GME) to $7.50 from $30.00 while reiterating an Underperform rating on the stock.
The analyst sees the recently-announced staff layoffs and stock split as a sign of “broader turmoil at GameStop.” The analyst also reiterated his earlier stance that the GME stock price remains “disconnected from the fundamentals of the business due to ongoing support from eager retail investors.”
He also described the company’s turnaround plan as “ineffective so far,” given the layoffs GameStop announced recently.
“We remain skeptical about the potential for sustained success for its new NFT marketplace given broader NFT sector trends, walled gardens on console and mobile (at least for the time being), and questions that we have about overlap with GameStop’s core customer base,” the analyst added in a research note sent to clients today.
The $7.50 per share price target is comprised of $3.50 per share of cash, $2.50 per share of going concern, and $1.50 per share for the NFT exchange, he explained.
“We remain concerned that GameStop has not generated net income in any quarter since it replaced its management team, and view the layoffs and weak NFT market as signs that its business will continue to deteriorate for the foreseeable future,” the analyst concluded.
Based on the current market price of $38.25, the analyst sees a downside risk of c. 80%. GameStop stock price is down 0.5% today, as of 09:42 EST.
