GameStop investors sent the company’s shares up 40% after fourth-quarter results showed it had swung to a net profit. Unfortunately, investors have forgotten that with such a surge, GameStop will have to grow into a new valuation: jennifersaba
Different models of the Nintendo Switch are seen on display in a GameStop in Manhattan, New York, U.S., December 7, 2021. REUTERS/Andrew Kellyinvestors sent the company’s shares up 40% on Wednesday morning after fourth-quarter results showed it had swung to a net profit. That suggests the company that counts Chewy Founder Ryan Cohen as its chair has put some of its meme-fueled fundraising to use.
To justify GameStop’s enterprise value of more than $6 billion, factoring in Wednesday’s price jump, the retailer would have to generate nearly $18 billion in revenue this year to match fellow chain Best Buy’s enterprise value-to-sales ratio of at 0.4 times. That’s triple the revenue that analysts are penciling in, according to Refinitiv. Bridging the gap requires more than just hype. It means Cohen and his crew will have to get more customers in the door.
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