GameStop's turnaround plan accelerates but one analyst still believes the stock is worth only $30

Published Mon, Apr 19 202110:38 AM EDT

GameStop 's new succession plan sparked a big rally on Monday, but one Wall Street analyst is not yet convinced that the video game retailer can pull off an e-commerce transformation. Shares of GameStop rallied more than 11% to around $172 on Monday, bringing its 2021 rally to more than 800%. The move higher came after the announcement that CEO George Sherman will step down on July 31, or earlier if a successor is appointed. The board is leading a search to identify CEO candidates who can accelerate the next phase of the company's transformation, GameStop said in a statement. "The company has yet to show financial success in an industry that is rapidly shifting to digital," Joseph Feldman, analyst at Telsey Advisory Group, said in a note. "And, we continue to believe the current valuation far exceeds our rosy fundamental expectations and projected multiyear benefits from the strategic transformation." Telsey maintained its underperform rating on GameStop and 12-month price target of just $30. The analyst acknowledged that GameStop should benefit from the new gaming cycle, with current demand outpacing supply for new generation Microsoft and Sony consoles. He's also optimistic about the company's agreement with RC Ventures, the board refresh as well as its healthy balance sheet. GameStop announced a $1 billion stock sale earlier this month to capitalize on the historic short squeeze in January. The move also aims to strengthen its balance sheet and speed up its e-commerce transition, which is led by activist investor and Chewy co-founder Ryan Cohen. "GameStop's next CEO and CFO are likely to come from the tech industry, as with the other recent senior hires, and would require a wide range of strategic and operational experience, given GameStop's complex business model, including ~4,800 global stores, digital, used games, new software and hardware, and collectibles," Feldman said. The company has hired former Amazon and Google executive Jenna Owens as its new chief operating officer. — CNBC's Michael Bloom contributed reporting.

A GameStop store is pictured in New York, January 29, 2021.

Carlo AllegriI | Reuters

GameStop's new succession plan sparked a big rally on Monday, but one Wall Street analyst is not yet convinced that the video game retailer can pull off an e-commerce transformation.