GameStop stock is still 'overvalued fundamentally,' strategist says
GameStop's stock continues to be a dog with fleas, one strategist contended.
"These companies are overvalued fundamentally," Steve Sosnick, chief strategist at Interactive Brokers, said on Yahoo Finance Live (video above) about GameStop stock.
"It's cultish," Sosnick added about the continued belief in meme stocks, particularly among a subset of Reddit retail traders. "To be fair, a lot of people have made money by being part of the cult."
To Sosnick's point, GameStop continues to put up fundamentally bad quarters that should suggest less enthusiasm for the stock — not more.
On Wednesday, the gaming retailer reported that second-quarter sales fell 4% from the prior year as consumers pulled back on non-discretionary purchases. GameStop served up a $106.2 million adjusted operating loss, worse than the $51.4 million loss a year ago. Year to date, the company has lost $259.9 million on an adjusted operating basis.
GameStop CEO Matt Furlong promised a more watchful eye on costs and a return to profitability in a brief earnings call that stopped just short of nine minutes. Furlong, whose short earnings calls are becoming a trademark, also sidestepped providing much insight into his turnaround plan for the company.
The retailer did unveil a new partnership with crypto platform FTX — though details were scant there too, other than the announcement that FTX gift cards will be available in GameStop stores.
GameStop stock still managed to trade higher on the news, with shares up 4% as of 1:00 p.m. ET on Thursday. The company's ticker page was one of the most visited on the Yahoo Finance platform.
"We are encouraged that profitability improvement goals were set for coming quarters, a result of improved costs," Jefferies Analyst Stephanie Wissink said in a note to clients. "GameStop has a passionate shareholder base, but in current market conditions, somewhat unclear long-term growth prospects remain a key source of speculation & debate. Management offered a view into the future GameStop with an omni-channel bias including greater emphasis on e-commerce + using stores as hubs to connect consumer communities & improve fulfillment capabilities. Cash burn remains a concern."
Wissink maintained a Hold rating on GameStop stock but cut her price target to $26 from $27.50.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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