'Another Hail Mary'—Analysts slam GameStop stock crypto hype as PR gimmick
Although GameStop stock's latest rally is less volatile than the meme-stock craze of a few years ago, analysts say it is still largely driven by wishful thinking rather than fundamentals.
GME rose 9.2% last week following a report from CNBC that the video game retailer was weighing the possibility of investing in bitcoin and other cryptocurrencies.
CNBC’s report came after GameStop CEO Ryan Cohen recently posted a picture of himself with Strategy (fka MicroStrategy) CEO and bitcoin maximalist Michael Saylor on X, fueling speculation that the company could be entering the crypto space again.
GameStop launched a digital asset wallet in 2022 that allowed gamers to store and manage their cryptocurrencies and non-fungible tokens (NFTs). However, the company shut it down in 2023, citing regulatory uncertainty.
But the news of Cohen and GameStop potentially adding bitcoin to its balance sheet coincides with a growing bullishness around cryptocurrencies in the US with the expectation that the Trump administration will overhaul regulations in favor of digital assets.
Investors might therefore view GameStop’s crypto play as a solid way to diversify its revenue stream without running into potential minefields with the Securities and Exchange Commission (SEC).
The company also announced on Tuesday a plan to pursue the sale of its business in France and Canada.
This could help improve the company's operational efficiency and strengthen its balance sheet, even if it means the Texas-based company will be sacrificing some of its international revenue stream. GME’s shares rose 1.2% in premarket trading.
GamesStop’s long-term business plan remains a question
Even without Keith Gill (aka “Roaring Kitty”) helping to drive GME’s price to dizzying highs and lows and an infamous short squeeze that was wild enough to attract the interest of Hollywood, GME is likely to remain volatile.
Because the stock remains extremely popular among retail investors, it’s more susceptible to the whims of news cycles and online phenomena like Roaring Kitty.
And while GameStop’s investments in bitcoin and other cryptocurrencies could provide another short-term boost for GME, investors— especially institutional investors—will likely want to hear more from Cohen about a sustainable, scalable business strategy going forward.
As the buying habits of gamers have changed along with the buying habits of almost all retail shoppers, abandoning brick and mortar stores for online shopping, the company’s prospects have suffered. Its 2024 sales plunged year-over-year, even though GME’s stock still rallied in December.
Economist Peter Schiff has already thrown cold water on the company’s potential crypto investments, calling bitcoin “even more overpriced than GME,” in a post on X following CNBC’s report about GameStop’s internal discussions.
“GameStop, a company with no viable business plan, has thrown another Hail Mary by announcing that it might use its cash to buy Bitcoin,” Schiff wrote.
Schiff’s post brings up an interesting point: GameStop does have a fairly significant war chest of cash that it’s been sitting on since the meme-stock mania four years ago.
In fact, it has about $4.6 billion in cash reserves, but Cohen “has maintained strategic ambiguity about deploying these funds despite having explicit board authorization to invest across sectors ranging from cryptocurrency to private equity,” Business Insider reports.
With digital downloads now accounting for 89% of video game sales, according to Business Insider, Cohen’s biggest challenge could be deciding how to deploy that cash in order to modernize the brick-and-mortar retailer’s revenue stream.
Thus far, investors seem bullish on crypto investments being a part of that plan.