GameStop Drops as Ascendiant Cites Rising Digital Game Sales

GameStop fell sharply after an analyst at Ascendiant Capital Markets downgraded the videogame retailer, noting that digital videogame sales are rising.
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GameStop  (GME) - Get Report shares dropped on Monday after an Ascendiant Capital Markets analyst downgraded the Reddit-favorite stock to sell as digital sales of videogames rise.

Shares of the Grapevine, Texas, company dropped 9.7% to $143 at last check.

Ascendiant Capital Markets analyst Edward Woo downgraded GameStop to sell from hold and cut his price target on the retailer to $10 from $12.

The analyst said that the Reddit-fueled trading surge in GameStop is “likely to fade as digital threats increase." 

The company in recent months saw its stock price jump as individual investors who participated in the subreddit WallStreetBets traded substantial amounts of its shares.

The Reddit/WallStreetBets investors fueled a rally that lifted the shares to as much as $483 in late January. 

"Increasing digital sales from videogame publishers" are "a looming risk given GameStop’s minimal market share as the market for new gaming systems matures after new launches from Microsoft  (MSFT) - Get Report and Sony Group  (SONY) - Get Report," Woo said in a note about GameStop's prospects.

He added that GameStop “declined to provide forward guidance due to the uncertain nature of the current pandemic.”

GameStop Shares Jump After Ryan Cohen Named Chairman

GameStop shares have surged nearly 800% since Ryan Cohen began working with group. Cohen, one of the company's key investors and leader of its e-commerce strategy, was named chairman of GameStop.

Woo also said that GameStop's stock surge is based not on fundamentals but on "retail investors' sentiment, hope, momentum, and the powers of crowds.”

GameStop Plunges on Plans to Sell 3.5 Million Shares

Last month, GameStop appointed an Amazon.com  (AMZN) - Get Report executive, Elliott Wilke, as chief growth officer, focused on growth strategies and marketing.

The company has five sell-equivalent ratings, compared to two hold ratings and zero buys, according to data compiled by Bloomberg