There’s no need to worry that video game retailer GameStop (NYSE:GME) will end up like Bed Bath & Beyond (NASDAQ:BBBY). There are important differences between GameStop and Bed Bath & Beyond, and GME stock actually has the potential to make a multi-bagger move in 2023.
Some folks might lump GameStop into the same category as Bed Bath & Beyond because meme-stock traders have targeted these two companies in the past. Also, both companies had their share of problems after the Covid-19 pandemic struck.
However, GameStop has comeback prospects while Bed Bath & Beyond is on a relentless path toward destruction. So, don’t obsess over meme-stock comparisons. Even as BBBYQ stock rapidly loses value, GameStop stock could be a worthy investment for the long term.
GameStop Is Fundamentally Different From Bed Bath & Beyond
Recently, there have been multiple signs that Bed Bath & Beyond is in serious trouble. For instance, with a heavy debt load and a “[c]ontinuation of negative operating losses,” Bed Bath & Beyond resorted to a massive share sale of up to $300 million. Plus, the company has had a terrible quarterly earnings track record, and the company’s vendors feared that Bed Bath & Beyond might file for bankruptcy protection.
Meanwhile, GameStop proved that it can be a successful, profitable business. Impressively, the company swung from a string of net earnings losses to a net profit in 2022’s fourth quarter. This represents a milestone moment, as it’s GameStop’s first net-income-positive quarter in two years.
Furthermore, GameStop reduced its selling, general and administrative expenses, maintained a healthy inventory, and ended Q4 2022 with cash, cash equivalents and marketable securities totaling $1.391 billion. Hence, unlike Bed Bath & Beyond, GameStop is making significant strides as a financially viable business.
GME Stock Has Strong Comeback Potential
I’m actually targeting a revisit of GME stock’s 52-week high, which is $48. This might sound overly ambitious, but GameStop’s return to its core business is definitely bullish for the company and the stock.
As you may recall, GameStop’s management wanted to emphasize digital/e-commerce sales and non-fungible tokens (NFTs) for a while. Yet, this strategy didn’t yield the intended results (i.e., it didn’t bring a revenue windfall to the company). Consequently, GameStop shifted its focus back onto the company’s brick-and-mortar locations.
It’s a smart move for GameStop to return to its core business model. There’s no need for GameStop to directly compete with other companies that stream games. Instead, GameStop can now dominate the niche market for tangible video-game sales.
Clearly, Director Larry Cheng is optimistic about GameStop’s current business strategy. Cheng reportedly purchased 5,000 shares of GameStop through Cheng Capital LLC. He clearly expects GME stock to gain value, and that’s significant, as Cheng is a notable GameStop insider.
GameStop Stock Won’t End Up Like BBBY Stock Did
GameStop is demonstrating notable progress on the financial front. At the same time, Bed Bath & Beyond is only deteriorating. Really, it’s not reasonable to compare the two companies.
Moreover, GameStop’s return to its core business is a smart move. This, along with the company’s firming fundamentals, could propel GME stock into the $40 range. So, feel free to consider a small share position in GameStop today.
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.