GameStop (NYSE :), the video game retailer favored by the & # 39; rebels & # 39; from Reddit, is active again. Shares of the physical electronics seller are up more than 147% in the past five trading days.
The recovery comes after a spectacular drop in the stock's value, when it fell from $ 483 in January to less than $ 40 in late February. Unlike the previous boom, sparked by a battle between Reddit-inspired investors and the hedge fund managers who were short of stocks, this time GME enthusiasts see a major turnaround story unfold.
GameStop Weekly Chart.
The current GameStop stock rally accelerated after the Texas-based company said this week that it chose Chewy (NYSE 🙂 founder and activist investor Ryan Cohen to lead its e-commerce push.
While forming a strategic planning and capital allocation committee, led by Cohen, GameStop said the new format will identify actions that can transform the company into a technology company and help create lasting value for shareholders.
This announcement has barely changed the market's perception that the GameStop mania is purely speculative, fueled by social media outlets, and does not justify the company's $ 22 billion market valuation.
While this debate is unlikely to abate as long as GameStop remains the darling of speculative investors, it is also important to analyze the chances of a possible turnaround Cohen could bring to this troubled company. His track record as an e-commerce entrepreneur is impressive and deserves the attention of investors.
E-Commerce Transformation Plan
Cohen founded the online pet store Chewy in 2011. His leadership was key. power to help the upstart compete successfully against Amazon (NASDAQ 🙂 and Walmart (NYSE :). Six years later, after helping Chewy achieve annual sales in excess of $ 1 billion and acquire a leading share of the online pet space, Cohen sold the company to PetSmart Inc. for $ 3.35 billion. A few years after that, Chewy went public and is now worth about $ 38 billion.
Everyone knows at this point that Cohen will be able to use the same playbook for GameStop, but his plan for the company's turnaround is impressive.
In a letter to senior management in November, Cohen stressed that GameStop must evolve into a technology company that "delight gamers and deliver exceptional digital experiences" to transform from a retailer that gives more priority to its physical footprint and stumbles over the online ecosystem. He recommends reducing the company's physical presence, selling business overseas, and expanding GameStop's e-commerce capabilities.
Since November, Cohen has managed to bring about some structural changes that could put GameStop on a growth path. Last month, the company announced a number of new hires that fit its strategy.
Matt Francis, formerly a technical leader at Amazon Web Services, was appointed as the company's Chief Technology Officer; Kelli Durkin, a former president of Chewy, has been named senior vice president of customer care; and Josh Krueger, who previously held senior roles at Amazon and Walmart, as Vice President of Fulfillment. In addition, the company is looking for a new Chief Financial Officer with a technology background.
As the gaming industry market is projected to reach $ 217.9 billion by 2023, there are plenty of growth opportunities available. If Cohen succeeds in his restructuring plan, GameStop could get some of that.
Bottom Line
Our approach to growth investments does not recommend that readers buy speculative stocks such as GameStop. But the active involvement of a successful technology entrepreneur indicates that the company is serious about restructuring its business. At some point, GameStop could start producing growth.
Wall Street, however, does not yet see that outcome. The majority of analysts continue to rate GameStop as a & # 39; sale & # 39 ;.
