There are reasons to believe that video game retailer GameStop (NYSE:GME) will be out of business within the next few years. However, as a contrarian, I expect the GME stock price to head higher by 2025. Granted, it’s risky to wager your money on GameStop. Yet, there are reasons to believe that GameStop’s management can set the company back on the path to success.
Oftentimes, GameStop is compared to Bed Bath & Beyond (OTCMKTS:BBBYQ) because both companies have been short-squeeze targets. The two companies aren’t actually very similar, though. A more relevant comparison in 2023 would be between GameStop and the now-defunct DVD rental store Blockbuster. (Or perhaps I should say, “nearly defunct,” as there may be one remaining Blockbuster location.)
It’s a gutsy move to buy GME stock when respectable commentators are bearish on GameStop. Still, it’s encouraging that the company’s management has plotted out a roadmap for GameStop’s success. So, let’s delve into the good, the bad and the ugly things that you should consider if you’re thinking about investing in GameStop.
Could GME Stock Go to Zero?
It’s certainly possible that GameStop’s shareholders will face a total loss at some point. That’s why you don’t want to go all-in as an investor. Proper position sizing is the key to surviving and thriving in this game.
Two commentators I highly respect, Thomas Yeung and Thomas Niel, have contended that GameStop could be the next Blockbuster. The argument (and I’m summarizing it very simplistically here) is that GameStop is making a mistake by de-emphasizing e-commerce video game sales and re-focusing on brick-and-mortar sales.
If physical console games end up like DVDs, then it’s conceivable that GameStop could end up like Blockbuster. In that case, GME stock could end up on an over-the-counter market. The worst-case scenario is that the stock might go to zero.
GameStop Looks Ahead to a Brighter Future
GameStop’s demise isn’t the only possible ending to this story, though. Headline-grabbing video game releases like The Legend of Zelda: Tears of the Kingdom could save GameStop from its seemingly inevitable downfall.
Before you give up on GameStop, be sure to read CEO Matt Furlong’s letter to the company’s shareholders. In it, Furlong makes a great point: GameStop “produced net income of $48.2 million in the fourth quarter of fiscal 2022.” That’s a huge improvement compared to the company’s loss of $147.5 million from fiscal 2021’s fourth quarter.
As GameStop swings to profitability, it doesn’t sound like the company’s business model is failing. Best of all, GameStop has a roadmap for the future. For one thing, the company plans to build a “stronger presence in higher-margin categories like collectibles and toys.”
Also, GameStop will continue to slim down by reducing “excess costs.” Furthermore, the company intends to leverage its “unique refurbishment capabilities to drive growth” in the pre-owned game category. Hence, GameStop could succeed by catering to certain niche segments of video game users.
So, Here’s My GME Stock Price Prediction for 2025
Could the GameStop share price go to zero? It’s possible, but I wouldn’t say it’s probable. GameStop’s bottom-line improvement indicates that the company won’t be the next Blockbuster anytime soon.
I expect GME stock to revisit $40 in 2025. That’s a contrarian position as some commentators are staunchly bearish on GameStop. If GameStop can deliver on its action plan, the company and its shareholders could enjoy powerful profits over the next couple of years.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
