Shares of GameStop (GME) plunged in trading on Wednesday after the video games retailer announced an offering of up to 20 million shares. Moreover, the company’s Q2 results were disappointing as the shift towards online shopping and digital downloads continues to impact its core business of selling video games.
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To address this issue, GameStop intends to use the funds from this offering for general corporate purposes, including potential acquisitions and investments according to its investment policy.
GME Is Evaluating Its International Assets
In addition, the company stated in its quarterly filing that it was evaluating its international operations and assets to improve its profitability. Furthermore, the company is assessing its store network and expects to close more locations than in recent years. In fact, earlier this year, GME’s CEO Ryan Cohen pointed out the fierce competition in the gaming console market that could have pushed the company to close more of its stores.
Wedbush Analyst Continues to be Bearish on GME
Meanwhile, a Reuters report highlights Wedbush analyst Michael Pachter’s view that GameStop faces substantial challenges in its efforts to return to growth. Pachter notes that the rise of streaming services is a major obstacle, and he criticizes the company for lacking a clear strategy to enter new, high-growth categories.
Is GME Stock a Buy, Sell, or Hold?
Turning to Wall Street, only Wedbush analyst Michael Pachter is covering GME stock. According to him, he sees more than 57% downside for GameStop based on his price target of $11 per share. Year-to-date, GME stock has surged by more than 30%.
