GameStop (GME) PT Lowered to $5.60 at Wedbush, 'Thick Cloud, Thin Silver Lining'

Wedbush analyst Michael Pachter lowered the price target on GameStop (NYSE: GME) to $5.60 (from $6.00) while maintaining a Underperform rating.

The analyst said: "Despite a quarter that featured an extra week and modestly positive industry trends, GameStop delivered a large sales decline as it continues to deal with a mix shift in software sales, declining hardware sales, fewer large console releases, and the growth of subscription services. The silver lining is that cash burn and losses appear to be manageable going forward. With its current cash balance, GameStop can weather $100 million of annual losses for a decade or more. However, should its revenues decline by $150 – 200 million per year (which we think is highly likely given its lack of clear strategy to replace lost games sales), it may have trouble trimming costs fast enough to stem the growth of its losses. If we’re right, GameStop has a likely runway of no more than five years. The demise of GameStop is outside the 12- month window we use for our price target, but we expect the company’s demise at some point later this decade."

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