Bitcoin now part of GameStop’s investment policy

Takeaways

• GameStop’s shares soared Wednesday after the retailer added Bitcoin as a corporate investment policy.
• Video game retailer also reported declining revenue, but improved profits as a result of cost-cutting measures.
• Wedbush analysts raised their price target but still expect that the stock will lose more than half of its value.

GameStop’s (GME) stock rose around 14% on Wednesday, after the retailer announced its fourth-quarter results. It also announced that Bitcoin (BTCUSD), a new investment option for the company, had been added.

The news that GameStop would be incorporating Bitcoin into its strategy came after a report that was published last month that suggested the retailer might be considering investing in cryptocurrency. A picture posted to GameStop CEO Ryan Cohen’s social media—also last month—of himself with Michael Saylor, the co-founder of Strategy (MSTR), also sparked speculation as Strategy is the largest corporate holder of Bitcoin.

GameStop’s shares were up 14% on Wednesday morning. They are up nearly 90% in the last year.

"We presume this means that the company intends to invest in Bitcoin," Wedbush analysts said in a note following the announcement.

Wedbush Says GameStop's Operations 'Have Some Value,' But Still Expect Shares to Fall

The analysts lifted their price target to $11.50 from $10 with an "underperform" rating, still expecting shares to lose well over half their value. They said GameStop has proven them wrong because it has almost broken even on an operational basis, recording operating losses under $10 million each of the last two years.

GameStop reported a decline in revenue for the fourth quarter of the year, but profits increased as the retailer closed stores and sought to cut costs.

"While it is arguable that the Q4 results are not sustainable, we did not expect GameStop to even approach operating breakeven ever again. We were wrong, and it is clear that the company’s operations have some value, albeit not as great as its share price suggests," the analysts wrote.