Analyst says GameStop's stock is still overpriced because traders hope to sell it to someone else at a higher price

GameStop is still being pumped like it’s got something real behind it, but the only thing holding it up is a line of people praying they can flip their shares to someone dumber. That’s the whole strategy. There’s no big plan, no actual growth, just blind hope and overpriced stock.

According to Wedbush’s Michael Pachter, who put out a note on Wednesday, GameStop has no clear direction. He said, “Despite a complete lack of a clear strategy, GameStop has consistently capitalized on the existence of ‘greater fools’ willing to pay more than twice its asset value for its shares — and so far, they’ve been correct.”

This came after the company’s Tuesday earnings showed a drop in first-quarter revenue, which was expected because people are buying games online, not walking into stores. But instead of fixing their core business, GameStop took a wild detour, buying 4,710 bitcoins worth over half a billion dollars.

It’s copying the same move MicroStrategy made, but here’s the problem: MicroStrategy is a tech company with actual value. GameStop is not.

Buying Bitcoin isn’t a business strategy

Michael thinks this Bitcoin plan makes no sense. He wrote, “It is difficult to understand why any investor would be willing to pay more than 2x cash value for the possibility of GameStop converting more of its cash into Bitcoin.”

GameStop’s stock is already trading at 2.4 times its actual cash, which means it’s way overvalued. There’s no way putting more money into crypto is going to make it worth even more. Investors who believe in Bitcoin can just buy the coin or an ETF themselves. They don’t need GameStop as the middleman.

CEO Ryan Cohen claimed the move was about macroeconomic fears. He said Bitcoin’s limited supply and decentralization could help the company hedge against bigger risks. That doesn’t explain how a video game chain plans to survive while turning into a crypto treasury. Bitcoin might be solid, but it’s not a business model for a retail company that’s bleeding relevance.

Michael didn’t hold back. He doubled down on his underperform rating and gave GameStop a 12-month target of $13.50 — that’s 55% lower than the $30.15 close on Tuesday. He broke that down to $12.50 in cash per share and $1 for the company’s business itself. “GME shares trade at a level that overlooks the many challenges ahead,” he said.

GameStop is using Bitcoin like a smokescreen, but there’s still no real answer for why it exists as a retail business today. They didn’t lay out any future direction. They didn’t explain how they plan to compete with digital game downloads. They just dropped a crypto bomb and left everyone to figure it out.

Greater fool theory is doing the heavy lifting

Every part of this situation is built on the greater fool theory. That’s the idea that you can make money off a worthless or overvalued asset, not because it’s good, but because someone else might buy it from you for even more. It only works as long as you find a bigger fool. Once that chain breaks, the last one holding the asset is stuck with it.

That’s exactly what’s happening here. Investors aren’t buying GameStop because they believe in the company. They’re betting they can flip their shares for a profit. They think someone else will see the price go higher and jump in, even though the business underneath hasn’t improved.

The problem is that this can’t last forever. Once people realize the stock price is disconnected from reality, the sell-off starts. And when that happens, the shares will crash back down to something closer to what the business is actually worth — maybe less. Everyone who bought in late gets burned. Everyone who sold earlier walks away with the money.

Michael’s breakdown shows how fragile the whole thing is. GameStop is leaning on crypto and the hope that its loyal army of speculative traders sticks around. But even that crowd has limits. And if the company keeps dodging its real problems, the last fools in line are going to pay for it.

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