(Reuters) -Shares of Reddit-favorite GameStop Corp fell nearly 15% before the bell on Wednesday, after the videogame retailer said it could cash in on a meteoric rise in share price to fund its e-commerce expansion.
GameStop has surged nearly 900% so far this year and at the peak of the trading frenzy they had touched $483 a piece. The shares were last down at $155 as the company skipped a question and answer session after reporting quarterly results.
The company reported a ninth straight decline in quarterly sales and said it will close more retail stores and exit unprofitable businesses, underscoring Wall Street concerns about its business fundamentals.
Wedbush analysts downgraded the stock to “underperform” from “neutral”, saying the short squeeze has boosted the share price to levels that are completely disconnected from the fundamentals of business.
“Our downgrade is not a reflection of our opinion of company management, which remains very high; rather, it appears that the ‘real’ value of GameStop shares vastly exceeds the ‘fundamental’ value,” Wedbush analysts said in a research note.
Billionaire investor and Chewy.com co-founder Ryan Cohen, who is part of GameStop’s board, expects to transform the brick-and-mortar retailer into an e-commerce firm that can take on big-box retailers such as Target Corp and Walmart Inc and technology firms such as Microsoft Corp and Sony Corp.
Meanwhile, Jefferies analysts raised their price target by a whopping $160 to $175, much higher than the median price target of $25, according to Refinitiv data.
(Reporting by Munsif Vengattil and Akanksha Rana in Bengaluru; Editing by Arun Koyyur)
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