Wedbush: GameStop’s Stock Surge Defies Fundamentals

• GameStop Corp. (GME) acquired 4,710 Bitcoin (BTC) for $500 million, but Wedbush’s Michael Pachter maintains an “Underperform” rating with a $13.50 price target, citing a valuation 2.4 times its cash value.
• Compared to Michael Saylor’s Strategy (MSTR), which holds 580,250 BTC and trades at 1.75 times its Bitcoin holdings, GameStop’s stock price of $29.65 implies an overvalued core business at $8 per share.
• Despite modest success in its trading card business, Wedbush sees little recovery potential in GameStop’s retail operations, warning that its stock surge is driven by speculative sentiment rather than fundamentals.

GameStop Corp. (GME) has sparked investor enthusiasm with its recent acquisition of 4,710 Bitcoin (BTC) for $500 million, but Wedbush analysts argue the stock’s valuation is detached from reality when compared to Michael Saylor’s Strategy (MSTR). The retailer’s pivot to cryptocurrency, mirroring Saylor’s strategy, has driven its stock price to $29.65, yet Wedbush’s Michael Pachter maintains an “Underperform” rating with a $13.50 price target. Pachter notes that GameStop trades at 2.4 times its cash value, implying an $8 per share valuation for its core business, a stark contrast to Strategy’s 1.75 times its Bitcoin (BTC) holdings.

Strategy holds a significantly larger 580,250 BTC, dwarfing GameStop’s position, which Wedbush highlights as “literally 1% as great.” Both companies offer investors margin-based exposure to Bitcoin, but GameStop’s smaller crypto portfolio and struggling retail operations raise doubts about its sustainability. Wedbush acknowledges modest success in GameStop’s trading card business but sees little evidence of a broader recovery in its traditional retail segment. The brokerage speculates GameStop may continue converting cash into Bitcoin, further aligning with Strategy’s playbook, though Pachter warns the stock’s recent surge is fueled more by speculative momentum than fundamental strength.

The valuation gap between GameStop and Strategy puzzles analysts, with Pachter calling it “baffling.” GameStop’s stock price reflects a premium that far exceeds its operational performance, particularly as its core video game retailing business continues to face challenges in a digital-first market. Bitcoin’s growing adoption by corporations has fueled interest in firms like GameStop and Strategy, which position themselves as proxies for crypto investment. However, Wedbush emphasizes that GameStop’s limited Bitcoin holdings and lack of clear retail recovery make its current market enthusiasm unsustainable. Investors appear to be betting on future crypto purchases, but without concrete plans from GameStop, the stock’s trajectory remains uncertain.

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