Former hedge fund manager Whitney Tilson, who recently removed electronics retailer GameStop Corp. GME from the “Dirty Dozen” list of stocks to avoid, chimed in on the meme stock yet again.
What Happened: “What GameStop is doing is smart,” Tilson said, adding this was the reason why he removed it from the “Dirty Dozen” list.
To support his argument, he referred to a Wall Street Journal story that said GameStop is shrinking its way to profitability after its not-so-successful attempt to become an “e-commerce juggernaut” and an “online marketplace” for buying and selling non-fungible, or NFT, tokens.
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Billionaire Ryan Cohen, who runs the show at GameStop, has slowed the e-commerce push to focus on its roughly 4,400 brick-and-mortar stores, the report said. The company has also slashed costs, which allowed it to record its first profit in two years in the fourth quarter, it added.
Risk Remains: Despite taking GameStop off the “must-avoid stocks” list, Tilson is still wary of it.
“That said, I think the most likely outcome is that the company is now back to where it was before the meme stock foolishness – a melting ice cube – which makes its $6.8 billion market cap look very rich,” the former fund manager said.
He noted that GameStop shares trade at one times enterprise value to revenue compared to only 0.4% for bigger rival Best Buy, Inc. BBY. The latter, the analyst said, is a “much better-positioned” business.
Price Action: GameStop ended Thursday’s session up 0.18% at $22.50, according to Benzinga Pro data.
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