GameStop Plans Major Acquisition to Transform Business
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 2d ago
0mins
Source: Newsfilter
- Ambitious Acquisition Plans: GameStop CEO Ryan Cohen announced the company's intention to acquire a publicly traded consumer company significantly larger than itself, aiming for a market cap of $100 billion, which is about ten times its current valuation, indicating potential transformational impact.
- Cautious Market Reaction: While Cohen expresses confidence in the acquisition's prospects, industry investment bankers are skeptical about the feasibility of achieving such dramatic value growth in the retail sector without a fundamental business model transformation.
- Improved Financial Performance: Since taking over as CEO in September 2023, Cohen has significantly cut costs and enhanced profitability, with GameStop's gross margin increasing by 7 percentage points and net income reaching $77.1 million, marking consecutive profitability after five years of losses.
- Substantial Cash Reserves: GameStop has amassed over $9 billion in cash and marketable securities over the past two years, which Cohen plans to leverage for acquisitions, although he remains cautious about liquidating bitcoin holdings to support these plans.
Trade with 70% Backtested Accuracy
Stop guessing "Should I Buy GME?" and start using high-conviction signals backed by rigorous historical data.
Sign up today to access powerful investing tools and make smarter, data-driven decisions.
Analyst Views on GME
About GME
GameStop Corp. offers games and entertainment products through its stores and ecommerce platforms. The Company operates in four geographic segments: United States, Canada, Australia and Europe. Each segment consists primarily of retail operations, with the significant majority focused on games, entertainment products and technology. The Company has a total of approximately 3,203 stores across all of its segments: 2,325 in the United States, 193 in Canada, 374 in Australia, and 311 in Europe. Its stores and ecommerce sites operate primarily under the names GameStop, EB Games and Micromania. Its Australia and Europe segments also include 38 pop culture-themed stores selling collectibles, apparel, gadgets, electronics, toys and other retail products for technology enthusiasts and general consumers in international markets operating under the Zing Pop Culture brand. Its retail stores are generally located in strip centers, shopping malls and pedestrian areas.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
GameStop CEO Plans Major Acquisition Targeting Consumer Company
- Clear Acquisition Target: GameStop CEO Ryan Cohen announced plans for a 'very, very, very big' acquisition aimed at a consumer company that is undervalued yet high-quality, scalable, and growth-oriented, indicating a strategic move that could transform the company's future.
- Potential Market Value: Cohen believes that if this major investment succeeds, GameStop could be worth several hundreds of billions of dollars, which would not only significantly enhance the company's market position but also result in a substantial payday for him due to his incentive-based compensation.
- Characteristics of Target Companies: Cohen highlighted that the ideal acquisition target should have a sleepy management team and could include well-known consumer brands that have underperformed for years, such as Best Buy, Kohl's, and Peloton, which still possess strong real estate and brand equity.
- Positive Market Reaction: GameStop closed trading on Friday with a market cap of $10.7 billion after a 4.7% rally, reflecting a positive market response to its acquisition plans and investor optimism regarding Cohen's strategic vision.
Continue Reading
Michael Burry Reinvests in GameStop, Eyes CEO's Vision
- Investment Return: Michael Burry has reinvested in GameStop (GME), and while he was previously a shareholder, this investment is not based on the company's fundamentals but rather on his confidence in CEO Ryan Cohen's leadership.
- Leadership Comparison: Burry compares Cohen to Warren Buffett, believing that GameStop could evolve into a company akin to Berkshire Hathaway, as Cohen's strategic investments have allowed GameStop to outperform during market downturns.
- Shareholding Stakes: Cohen currently owns approximately 42.1 million shares of GameStop, representing 9% of outstanding shares, and could receive options on over 171.5 million shares, indicating his confidence and long-term commitment to the company.
- Market Performance: Since Cohen joined GameStop's board in January 2021, the company has outperformed the S&P 500, although investors should remain cautious and wait for Cohen's investments in other areas to validate the success of this business model.
Continue Reading