:max_bytes(150000):strip_icc():format(jpeg)/GettyImages-2187616165-05972a11b7984782ae7b1183211cf043.jpg "The red and white GameStop logo is seen on the side of a building.")
Ying Projection / NurPhoto via Getty Images
Key Takeaways
- GameStop shares popped on Wednesday after the retailer added Bitcoin to its corporate investment game plan.
- The video game seller also posted declining revenue but improving profits amid cost-cutting efforts.
- Wedbush analysts raised their price target, but still expect the stock to lose more than half its value.
GameStop (GME) deals were up around 14% Wednesday, a day after the retailer released fourth-quarter results and announced the addition of Bitcoin (BTCUSD) to its corporate investment rule.
The confirmation that Bitcoin will be part of GameStop’s strategy followed a report last month that the retailer may be taking into consideration investing in the cryptocurrency. A picture posted to GameStop CEO Ryan Cohen’s social media—also last month—of himself with Michael Saylor, the co-founder of Plan (MSTR), also sparked speculation as Strategy is the largest corporate holder of Bitcoin.
GameStop shares were up almost 14% Wednesday morning, putting them up nearly 90% over the last 12 months.
“We presume this connotes that the company intends to invest in Bitcoin,” Wedbush analysts said in a note following the announcement.
Wedbush Phrases GameStop’s Operations ‘Have Some Value,’ But Still Expect Shares to Fall
The analysts lifted their cost out target to $11.50 from $10 with an “underperform” rating, still expecting shares to lose well upward of half their value. They said that GameStop has proved them wrong by approaching breaking precise on an operating basis, recording an operating loss under $10 million in each of the last two fiscal years.
GameStop disclosed declining revenue in the fourth quarter, while profits rose year-over-year as the retailer has closed stores and looked to cut costs.
“While it is arguable that the Q4 occurs are not sustainable, we did not expect GameStop to even approach operating breakeven ever again. We were wrong, and it is clear that the company’s mechanics have some value, albeit not as great as its share price suggests,” the analysts wrote.