GameStop's new $175 price target from Jefferies has Reddit traders celebrating
- The Jefferies analyst Stephanie Wissink increased her GameStop price target to $175 on Wednesday.
- Wissink cited e-commerce sales and a digital transformation as her reasoning in a note to clients.
- Reddit's Wall Street Bets forum celebrated the bullish news.
GameStop's new $175 price target from Jefferies has traders on Reddit's popular Wall Street Bets forum celebrating.
On Wednesday, the Jefferies analyst Stephanie Wissink raised her price target on shares of the video-game retailer to $175 from $15.
Wissink said in a note that she was raising the price target based on GameStop's move into e-commerce, "digital and affiliated value streams."
The massive jump came after GameStop announced its fiscal fourth-quarter results on Tuesday. The company missed analyst estimates for earnings and revenue in the quarter, but Jefferies analysts saw a silver lining.
In Wissink's upside scenario, GameStop would be able to shift its "sales mix towards collectibles, accessories, and digital" while leveraging "the popularity of E-Sports to drive customers into locations."
"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 while the company would have to "close locations that drag on margins," if it could "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 a share.
The note from Jefferies quickly made the rounds on Wall Street Bets.
A post titled "SUITS JUST RAISED PT FROM $15 TO $175 ITS TIME FOR TAKEOFFF" that showed a screenshot from a Bloomberg terminal with the new Jefferies GameStop price target received roughly 12,000 upvotes on the forum in five hours.
Reddit traders have been pushing GameStop and other so-called meme stocks higher for months amid a retail-trader boom.
The investment bank's new price target and news of the Chewy cofounder 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.
