Catalysts

Sep 14, 2020

Jefferies Sees Upside In GameStop, With New Xbox, PlayStation As Catalysts   Share: GameStop Corp (NYSE: GME ) caught a sell-side upgrade Monday morning after reporting second-quarter earnings last week. The GameStop Analyst: Jefferies analyst Stephanie Wissink upgraded GameStop shares from Hold to Buy and raised the price target from $7 to $8. The GameStop Takeaways: “Q4 kick-starts the next gen console cycle and we expect GME to win big and early,” Wissink said in the Monday upgrade note. The new console launch from Microsoft Corporation (NASDAQ: MSFT ) and Sony Corporation (NYSE: SNE ) is the major catalyst for GameStop and will also trigger the following for the company, the analyst said:   1. New hardware sales and needed trade-in inventory 2. New software sales, including many "Triple A" blockbuster games 3. High-margin preowned sales, with the new consoles having backwards compatibility 4. Peripherals and accessories 6. Loyalty membership expanded “We expect demand to outstrip supply,” Wissink said. The price target of $8 is based on selling 1 million units of the Playstation 5 and Xbox X consoles in the fourth quarter. For fiscal year 2021, Wissink forecast 3 million hardware units sold, the same ratio as prior cycles. Every 1 million units of hardware sold is worth $20 million in incremental EBITDA, the analyst said. Benzinga’s Take: The upgrade from Jefferies comes after two analysts maintained bearish ratings on GameStop after a disappointing earnings report. Credit Suisse has an Underperform rating and $3.50 price target. Benchmark has a Sell rating and $3 price target. GME Price Action: GameStop shares were trading 7.55% higher to $6.55 at last check Monday. Shares have fallen 20% over the last week.