Jim Cramer has compared GameStop Corp. (NYSE:GME) to an overvalued special purpose acquisition company.
What Happened: Cramer the host of CNBC’s “Mad Money” host criticized GameStop’s business model, suggesting it resembles a SPAC due to its reliance on raising capital despite poor business performance. He emphasized the need for GameStop to present a clear strategy to justify its stock price.
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“When you think of GameStop, you need to imagine a SPAC — and not just any SPAC, it’s a massively overvalued one that needs to purchase something incredible at an insane discount,” Cramer said.
GameStop reported a 31% year-over-year sales decline, marking its fourth consecutive quarter of losses. Despite this, the company turned a profit from interest on its $4.2 billion cash reserve.
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Cramer echoed an analyst’s view that GameStop should consider closing physical stores and operate as a bank. He also noted that many investors hope for acquisitions that could boost the stock’s value, a bet he is unwilling to take.
Why It Matters: GameStop’s recent financial results have been a cause for concern among investors. On Monday, the company reported second-quarter net sales of $798 million, falling short of the $895.7 million consensus estimate. The revenue miss was primarily due to lower-than-expected sales in hardware, accessories, and collectibles.
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Analysts have been vocal about GameStop’s struggles. Wedbush analyst Michael Pachter reiterated an Underperform rating and suggested the company could close all its physical stores and operate as a bank to manage its losses. Pachter questioned why GameStop shares traded at a premium to its cash reserves without a clear strategy.
Adding to the volatility, the “Roaring Kitty” account, known for its influence on meme stocks, recently posted a cryptic message on X, leading to speculation and increased trading volume for GameStop shares.
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This article Jim Cramer Agrees GameStop Should Consider Operating As A Bank And Labels The Meme Stock As ‘Massively Overvalued’ SPAC originally appeared on Benzinga.com
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