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On Monday, GameStop’s stock was promoted to the Russell 1000 index.
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GameStop had nine analysts covering the stock at the start of the year. Only three have ratings now, after an analyst suspended his goal, blaming the stock’s movement on social media and other nonfundamental considerations. In a note published on Monday, Baird analyst Colin Sebastian explained why he made his decision. He informed clients that he is deferring his Neutral rating and $25 price target until management reveals its new business strategy, which would allow analysts to better estimate free cash flow generation and assess intrinsic value.
Sebastian acknowledged that GameStop (ticker: GME) is rapidly transitioning from in-store to online videogame sales, but he believes that “share price volatility is tied more closely to non-fundamental trading, social media influences, and other factors that make it difficult, at least in the near term, to make a reasonable stock rating recommendation to institutional investors.” In lunchtime trade, the stock was up 3.5 percent to $216.86. The S&P 500 index was unchanged. Also on Monday, the stock rose to a new high.
Russell 1000 is a prestigious ranking system.
The small-cap index is a measure of how well a company is doing.
Russell 2000 is a company founded in the year 2000
index. All Russell 2000 funds had to sell the stock and all Russell 1000 funds had to acquire it after the move. According to FactSet, Sebastian’s departure leaves three analysts tracking GameStop. Ascendiant Capital Markets’ Edward Woo has a Sell rating and a $10 price objective on the stock. Stephanie Wissink of Jefferies rates the stock as a Hold with a price target of $190. Wedbush analyst Michael Pachter is in the middle, with an Underperform rating and a $50 target. Chewy co-founder Ryan Cohen revealed a stake in GameStop last summer, kicking off the company’s rollercoaster ride. Cohen joined the board of directors in January with two other former Chewy executives after increasing his shareholding to around 13 percent and encouraging the board to invest more in e-commerce. This news, along with a large short interest, speculative options activity, and social media activity, triggered a squeeze that sent shares surging. On social networking platforms like Reddit, retail investors are still bullish on the stock, and are even buying shares of other out-of-favor corporations like
AMC Entertainment is a company that produces movies.
Since then, GameStop has hired a new chief executive, chief operating officer, chief technology officer, and chief growth officer, as well as scores of other executives with e-commerce experience from companies like Amazon and eBay.
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as well as chewy Aside from $445 million in lease obligations that are categorized as long-term debt for accounting purposes, the company also sold nearly $1.68 billion in stock at market rates, restructured its board, and deleted long-term debt from its balance sheet. Despite GameStop’s efforts to become the go-to e-commerce platform for gamers, including investments in technology and extending its product line, analysts have been waiting for additional details, such as financial projections. In a June 9 shareholder address, Cohen, who is now the board chairman, stated that his aims for GameStop are to please customers while also driving long-term shareholder value. Cohen remarked at the time, “We realize some people want us to lay out a whole detailed plan today, but that’s not going to happen.” “At Chewy, we don’t talk big, make a lot of lofty promises, or telegraph our strategy to the competition. That’s the attitude we adopted.” Connor Smith can be reached at connor.smith@barrons.com.
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