What happened
On Monday, three days before GameStop (GME 0.10%) is scheduled to unveil its latest set of quarterly results, a rather bearish research note on the company prompted investors to sell out of the company. As a result, the share price of the video game retailer dived by nearly 16% on the day.
So what
That analyst was Wedbush Securities' Michael Pachter, an influential voice in the sphere of tech stocks generally and the video game segment specifically. On Monday, Pachter wrote a client note reiterating his underweight (read: sell) recommendation on GameStop stock at a price target of $45 per share (the company currently trades at just over $78).
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While he believes the company has certain advantages it can exploit, it's not a viable investment just now. In his view, it could see "modest" revenue growth this year and even has a shot at landing in the black on the bottom line. But it's hobbled by an unreasonably high stock price.
In his note, Pachter wrote:
The high-profile short squeeze that emerged early last year and ongoing support from certain retail investors, however, have spiked the share price to levels that are completely disconnected from the fundamentals of the business.
Now what
As for those upcoming quarterly results, Pachter believes GameStop will miss the average analyst estimate for revenue, although he expects an earnings beat. His own projections are for the company to earn $2.15 billion on the top line on comparable-sales growth of 1.3%, netting a non-GAAP (adjusted), per-share profit of $1.25. On average, prognosticators tracking the stock are modeling $2.22 billion for revenue and $0.84 for adjusted earnings.
GameStop's fourth-quarter and full-year 2021 earnings are slated to be released after market hours on Thursday.
