Frustrated analysts say GameStop is still a sell after execs skirt questions on earnings call

Published Wed, Mar 24 20219:09 AM EDTUpdated Wed, Mar 24 202110:12 AM EDT

Analysts vented frustration Wednesday morning after GameStop executives declined to answer questions about one of the most volatile businesses so far this year. Often a sanitized, dry group, Wall Street's analysts didn't hold back from voicing their frustration with GameStop CEO George Sherman and the video game retailer's decision to skirt a Q & A session on Tuesday that usually occurs at the end of an earnings call . "While everyone was expecting big news about some massive digital transformation in the mold of the new tech-oriented board members, nothing was said," wrote Joseph Feldman of Telsey Advisory Group. The stock was last seen down more than 16% Wednesday morning. "As for the much anticipated strategic plan, it sounded like every other retailer—invest in technology, build a superior customer experience, expand the product offering," Feldman added. "While there is nothing wrong with the strategy, it seems rather 'normal;' it is not the transformational commentary most were expecting to hear." As a result, Telsey cut its price target on GameStop to $30 from $33 and again reiterated that it believes the current share price around $181 is "divorced" from business fundamentals. The criticism from sell-side analysts come weeks after a coordinated effort among retail investors took advantage of big bets against GameStop and sparked a so-called short squeeze in the stock. The synchronized buying among individual investors, many of whom planned their move on social media site Reddit , sent GameStop shares spiking as high as $483 per share on Jan. 28 after ending 2020 around $18.80. The dizzying move higher not only captured Wall Street's attention and sparked a cult-like following, but also drew criticism from Capitol Hill, where lawmakers eventually summoned executives from GameStop, Reddit and market maker Citadel to testify about the mania and decisions to limit trading. Many investors, therefore, had hoped that GameStop would use its fourth-quarter earnings call as an opportunity to detail how it plans to change its business strategy after the chaos of the past few months. So when it failed to take any questions from analysts, the disappointment was palpable. That was the case at Bank of America, where analyst Curtis Nagle doubled down on his underperform rating after the underwhelming call. "Given the continuation of very challenged results for GME, change is needed and soon. ... Very little detail on a plan was given on GME 4Q's call," Nagle told clients. "We continue to be very skeptical on GME's efforts to address its long standing issue of digital disintermediation and the fact that its core market in new and pre-owned physical console gaming is shrinking at a rapid pace." Wedbush Securities, another investment firm, went so far as to join Bank of America and Telsey at an underweight rating. Jefferies analyst Stephanie Wissink, who has a relatively optimistic "hold" rating on GameStop shares, wrote that she was pleased to see GameStop refresh key leadership, including a new chief operating officer with experience from Amazon, Google, and Honeywell. "Changes in leadership at the board, executive, and operational levels are signals of a full reimagining of GME's enterprise model," she wrote. "Clearly, GME shares are subject to volatility beyond fundamentals and therefore we will continue to evaluate the elements of the digital thesis that are justified in a medium-term valuation methodology." — CNBC's Michael Bloom contributed reporting.

GameStop store signage is seen on January 27, 2021 in New York City.

Michael M. Santiago | Getty Images News | Getty Images

Analysts vented frustration Wednesday morning after GameStop executives declined to answer questions about one of the most volatile businesses so far this year.

Often a sanitized, dry group, Wall Street's analysts didn't hold back from voicing their frustration with GameStop CEO George Sherman and the video game retailer's decision to skirt a Q&A session on Tuesday that usually occurs at the end of an earnings call.

"While everyone was expecting big news about some massive digital transformation in the mold of the new tech-oriented board members, nothing was said," wrote Joseph Feldman of Telsey Advisory Group.

The stock was last seen down more than 16% Wednesday morning.