Credit Suisse Says Barnes & Noble Deal Highlights Value of "Unloved" Retailer GameStop (GME)

Credit Suisse raised their price target on Outperform-rated GameStop (NYSE: GME) Monday from $28 to $35, saying the Barnes & Noble, Inc. (NYSE: BKS) takeover proposal points to the continued re-valuation of "unloved" retail names.

Analyst G. Balter comments, "When Melissa Lee of CNBC's Fast Money introduced GameStop CEO Paul Raines on TV on 19th May, she noted that one of the reasons there are skeptics on GME stock is because "it's viewed as Barnes & Noble." Ironically, if that were true, as of 20th May at least, GME stock would be trading well into the mid $30 range."

Balter said the Barnes & Noble deal is significant not just because of the multiple offered (7x EBITDA for this year and 5x for next), but also because it recognizes value even for mainly brick and mortar retailers.

The analyst notes that GME is trading at just 4x projected EV/EBITDA. Applying a 5x multiple implies a $35 stock, a 25% premium to Friday's close.

For more ratings news on GameStop click here and for the rating history of GameStop click here.

Shares of GameStop closed at $27.88 yesterday.

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