Investors want a wider turnaround at confused video game retailers, so we look forward to launching a non-fungible token (NFT) market and entering the digital asset space by the end of July. ..
The move to NFTs will be a significant departure from GameStop’s (Ticker: GME) core retail business. It’s also gambling that may not move the earnings needle too much, adding another element of uncertainty around highly volatile stocks.
One of the original meme stocks, GameStop continues to go against traditional analysis and trading. Shares have skyrocketed by more than 40% in the last few days, up 12% on Wednesday, partly due to the surge by Chairman Ryan Cohen. In the last 52 weeks, stock prices range from $ 78 to $ 345 and have recently traded at around $ 138.
At the heart of GameStop’s NFT initiative is a partnership with startup Immutable X, a blockchain group. According to a press release, the two companies will subsidize NFT developers through a unique token called IMX and will donate up to $ 100 million. GameStop may eventually receive $ 150 million worth of IMX tokens if the NFT Marketplace and sales reach certain metrics.
Accelerating the push to NFTs is Cohen, an entrepreneur trying to relocate GameStop to more tech companies. So far, it hasn’t made a profit. GameStop recently posted a net loss of $ 148 million in the previous accounting quarter ending January 2022.
GameStop did not respond to a request for comment from Barron’s.. However, the company outlines plans to become an online marketplace for video games and related products with the aim of transforming it into a kind of video game.
(AMZN) For games.
NFTs theoretically fit that vision. And Wall Street is seeing a large total addressable market. Jeffreys analyst Stephanie Wisink predicts that this year’s NFT market sales will reach $ 35 billion, reaching $ 80 billion by 2025. The partnership between GameStop and Immutable X is “the beginning to make things clearer to the investment community. [the company] She wrote in a recent memo.
Still, numbering GameStop’s NFT initiatives is a bit of a guessing game.And GameStop doesn’t have a market on its own — other companies are building NFT marketplaces in particular.
Is it all worth it? Opensea, the largest NFT platform, runs about $ 3 billion in monthly NFT volumes and charges 2.5% for sales. This means that your monthly transaction revenue is $ 75 million or $ 900 million annually.
If Coinbase earns half of Opensea’s volume at the same rate structure, it will generate $ 450 million in annual revenue, Nedham analyst John Todalo estimates. In a bullish scenario, Coinbase could reach $ 1.3 billion in annual revenue if the volume exceeds the OpenSea level at a 3% rate.
Even if GameStop wins 20% of the $ 80 billion market in 2025, it will only generate $ 16 billion in revenue. With a 3% transaction fee per NFT, you generate $ 480 million in revenue. And it assumes that Coinbase and others can dodge messing around too.
“They may beat Coinbase with the launch of the NFT platform, but I’m skeptical about offering GameStop,” Todaro said in an interview. “Coinbase has a captive crypto audience that overlaps with NFTs, and Coinbase has liquidity, sourcing, and launch partners, so we need to reach out. The entire ecosystem needs to be much more robust than GameStop. . “
One hurdle to GameStop is to reach cryptocurrency buyers beyond the game. It is expected to be the core of the NFT market. The most valuable NFTs at OpenSea are not video game assets. They are boring monkeys, CryptoPunks, and other NFTs that have become cultural icons through savvy marketing and club-like profits for owners.
Another challenge for GameStop is to sell console games primarily for platforms such as the Xbox and PlayStation, rather than decentralized and executable PC-based games for NFTs. The console gaming ecosystem is like a “walled garden” tightly controlled by Microsoft (MSFT), Sony (SONY), and Nintendo (7974.Japan).
In order for GameStop to enter the NFT, companies may have to deal with Microsoft and other game studios and console makers.
GameStop may also be spending a lot of money on NFTs if they don’t have enough cash. GameStop reported $ 1.3 billion in cash and equivalents at the end of January, following an operating loss in the previous quarter.
“It’s just scary,” said Michael Pachter, a Wedbush analyst who has a reputation for selling at GameStop. “It wasn’t because the demand was so bad, but because they were spending too much on this NFT.”
GameStop “has no chance of success with this,” Pachter said, referring to NFTs. “I admire their motivation and the efforts they are making to transform the company. In fact, with a direction, I think this is a great place. How they compete. I don’t know if it has the above advantage. “
For now, Wall Street doesn’t seem to see NFTs as GameStop’s game changer. Very few analysts cover stocks, but this year’s average earnings are $ 6 billion, flat in 2021. The company is expected to report a loss of $ 4.18 per share in 2022 and $ 3.10 in 2023.
— Darren Fonda contributed to the report of this story.
Write to Jack Denton at firstname.lastname@example.org