GameStop’s new $175 price target from Jefferies has traders on the popular Reddit forum r/wallstreetbets celebrating.
On Wednesday, Jefferies analyst Stephanie Wissink raised her price target on shares of the video game retailer to $175 from $15.
Wissink said she was raising the price target based on GameStop’s move into e-commerce, “digital and affiliated value streams.”
The massive price target jump came after GameStop announced its fiscal fourth-quarter results on Tuesday. The company missed analyst estimates for both earnings and revenue in the quarter, but Jefferies analysts saw a silver lining.
In Wissink’s upside scenario, GameStop will be able to shift its “sales mix towards collectibles, accessories, and digital” while leveraging “the popularity of E-Sports to drive customers into locations” moving forward.
“With e-com at 30% of sales and already a $1.5B business, growing triple digits, we see a reasonable basis for $3B+ in annual sales in a 2-3 year timeframe,” the analyst said.
Wissink added that the company will have to “close locations that drag on margins,” but if it is able to successfully “shed its retail heritage and morph into a digital commerce (1P+3P) + advertising + content creation & curation platform, its valuation could rival digital peers with similar business models.”
Wissink got to her new price target after shifting her valuation method from an EBITDA multiple to a revenue multiple. Based on 3.4x sales, a 20% discount to peers according to Wissink, GameStop could be worth $175 per share.
After the note from Jefferies was released it quickly made the rounds on Reddit’s r/wallstreetbets forum.
A post from u/Accomplished_Til184 entitled “SUITS JUST RAISED PT FROM $15 TO $175 ITS TIME FOR TAKEOFFF,” which showed a screenshot from a Bloomberg terminal and the new Jefferies GameStop price target, received roughly 12,000 upvotes on the forum in just 5 hours.
Reddit traders have been pushing GameStop and other so-called meme stocks higher for months now amid a retail trader boom.
Now, the investment bank’s new price target and news of Chewy co-founder Ryan Cohen’s move to a more active role as a board member has only added fuel to the GameStop fire.
Shares of GameStop traded down nearly 20% on Wednesday on the first day of trading post-earnings release.