Ascendiant Capital Markets Expects 'Elevated' GameStop (GME) Stock Price to Come Back Down, Sees 85% Downside From Here

Ascendiant Capital Markets analyst Edward Woo lowered the price target to $23.00 per share from the prior $24.00 on the Sell-rated GameStop (NYSE: GME) stock.

A new price target reflects the estimated current cash value per share, Woo said in a client note.

“We believe our rating and price target reflects the company’s significant digital and execution risks offset by the small chance for a highly successful and valuable company transformation.”

“Recent reports by video game publishers shows that digital revenue is increasing at a fast pace (~90% or more of publishers’ revenues). We remain very concerned about the long term prospects for GME’s core video game business once hardware sales temper as the installed base matures. Despite very strong (partly abnormally driven by SIP COVID-19 restrictions) video game industry sales in 2021, GameStop’s software sales have been about flat,” the analyst added.

The analyst also took note of an “incredible stock rally” as shares soared more than 10x in 2021 due to “wild investor optimism about the company’s prospects and valuation and a humongous short squeeze.”

Woo also warned that he expects GME stock to continue trading in a volatile manner given its popularity on the Reddit chat boards. HE still believes shares do not trade “traditional fundamental valuations or metrics, but on retail investors sentiment, hope, momentum, and the powers of crowds.”

“Short term price movement forecasts [are] nearly impossible (and we acknowledge can drive shares much higher), but we believe that over the long run (over one year) GameStop’s current elevated share prices will come back down to match its current weak results and outlook,” the analyst concluded.

GameStop stock price closed at $152.14 on Thursday.

GME share price is down 0.5% in pre-open Monday.

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