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Business

Google Parent Alphabet to Cut 12,000 Jobs Amid Wave of Tech Layoffs

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Google’s parent company said it would cut its staff by 6% in its largest-ever round of layoffs, extending a retrenchment among technology companies after record pandemic hiring.

Alphabet Inc.

GOOG 5.72%

said the cuts would eliminate roughly 12,000 jobs across different units and regions, though some areas, including recruiting and projects outside of the company’s core businesses, would be more heavily affected.

The layoffs reached as high as the vice president level and affected divisions including cloud computing and Area 120, an internal business incubator that had already faced cuts last year, said people familiar with the matter.

The Google cuts make January the worst month yet in a wave of tech layoffs that began last year, according to estimates from Layoffs.fyi, which tracks media reports and company announcements. This week,

Microsoft Corp.

said it would eliminate 10,000 jobs, the largest layoffs in more than eight years. Online furniture seller

Wayfair Inc.

said it is laying off about 10% of its workforce, and

Unity Software Inc.,

which provides tools for creating videogames and other applications, also cut staff.

Earlier this month,

Amazon.com Inc.

said layoffs would affect more than 18,000 employees and

Salesforce Inc.

said it was laying off 10% of its workforce. Last year,

Meta Platforms Inc.

said it would cut 13% of staff.

Technology companies including Google expanded rapidly during the pandemic as life moved online. Recent cuts have been part of a broader pivot toward protecting profit and cementing the end of a growth-at-all costs era in technology. Google executives have in recent months said the company would be tightening its belt, reflecting a new period of more disciplined and efficient spending. But the company hadn’t announced cuts as deep as those of its Silicon Valley peers. 

Google hired aggressively as demand for its services rose during the health crisis, leading to more than 50% growth in total employee count across Alphabet since the end of 2019. The cuts this week appeared to fall short of the almost 12,800 employees Alphabet added to its roster in the third quarter last year.

“Over the past two years we’ve seen periods of dramatic growth. To match and fuel that growth, we hired for a different economic reality than the one we face today,” Alphabet Chief Executive

Sundar Pichai

wrote in a message to employees sent out Friday and posted on the company’s website.

“I take full responsibility for the decisions that led us here,” Mr. Pichai wrote. The corporate mea culpa for overhiring has become a recurring message in recent months at tech companies as executives realized that some of the hiring they undertook to keep pace with soaring demand for all things digital early in the pandemic left them overstaffed as the business environment soured.

Among the executives who have made such apologies are Salesforce Co-Chief Executive

Marc Benioff,

Meta Platforms CEO

Mark Zuckerberg

and Twitter Inc. co-founder

Jack Dorsey.

The recent headlines about tech layoffs don’t seem to match broader economic indicators, which show a strong job market and a historically low unemployment rate. WSJ’s Gunjan Banerji explains the disconnect. Illustration: Ali Larkin

Alphabet recorded $17.1 billion of operating income in the third quarter last year, an 18.5% decrease from the same period in 2021. Google executives partly blamed a slowdown in revenue growth on the company’s historic performance during the tail end of the pandemic. Alphabet shares rose 4.5% to $97.24 in morning trading Friday.

Alphabet earlier this month said it would cut more than 200 jobs at its Verily Life Sciences healthcare business, accounting for about 15% of the roles at the unit. Before that, some of the last major cuts Google announced were in 2009, when the company said it was reducing the number of jobs in its sales and marketing teams by roughly 200 globally.

Activist hedge fund TCI Fund Management, which had called on Alphabet to cut costs aggressively in November, said Friday the company should go further.

“Management should aim to reduce headcount to around 150,000, which is in line with Alphabet’s headcount at the end of 2021,”

Christopher Hohn,

TCI managing director, said in a letter. “This would require a total headcount reduction in the order of 20%.”

Current and former Google employees said layoffs would likely affect the company’s famously loose and collegial culture, which has been widely imitated in the tech industry.

Google employees have long enjoyed one of the most accommodating environments among large U.S. companies. A letter to potential investors in Google’s 2004 initial public offering said the company provided many unusual benefits, such as washing machines, and would likely add more over time.

As job cuts have accumulated in the tech industry, many employees at Google have pressed executives about the possibility of layoffs at the company. At a companywide meeting in December, Mr. Pichai told employees that the company had tried to “rationalize where we can so that we are set up to better weather the storm regardless of what’s ahead.”

A Google spokesman said that Friday’s cuts would affect not just Google, but also other Alphabet subsidiaries, but didn’t specify at what levels. Alphabet subsidiaries include Verily and the Waymo self-driving-car unit. The spokesman didn’t comment on which specific products or engineering units would be affected.

“Alphabet leadership claims ‘full responsibility’ for this decision, but that is little comfort to the 12,000 workers who are now without jobs,” said Parul Koul, executive chair of the Alphabet Workers Union, in a statement. “This is egregious and unacceptable behavior by a company that made $17 billion dollars in profit last quarter alone.”

Alphabet said it would offer U.S.-based employees two months notice, plus 16 weeks of severance pay, along with two additional weeks for each year an employee being laid off from the nearly 25-year-old company has worked there. In other countries, the company will follow local processes and laws, which sometimes require consultations with employee representatives before workers are laid off.

The company will also offer former employees access to resources to help them with their immigration status, job placement and mental health, the spokesman said. Tech companies in the U.S. often have employees on work visas tied to their employment.

Write to Sam Schechner at Sam.Schechner@wsj.com and Miles Kruppa at miles.kruppa@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Business

Best Buy, Home Depot Lock Up Goods to Fight Theft

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Shoppers are finding more empty space on store shelves, but not because the retailer is out of stock. In many cases, the items are locked away to prevent theft.

At a

Best Buy Co.

BBY -5.03%

store in the suburbs of Houston, hundreds of items including Bose speakers and Fitbit activity trackers have been replaced by small blue signs that read, “This product kept in secured location,” and ask shoppers to find store workers for help.

“There used to be a lot more on the floor itself than locked up in cages,” said

Gary Pearce,

a 47-year-old manager at a disaster restoration company who shops in the store weekly.

The store is a sign of an endemic challenge for retailers: how to stop theft without shrinking profits or inconveniencing shoppers. Retailers have long dealt with theft, and frequency is down from a peak last winter for some, said retail executives. But theft attempt levels are higher than they were before the pandemic.

Many large retailers, including

Home Depot Inc.,

HD -1.61%

have been locking up more items while testing other solutions. They track high-risk goods and lock up items in regions or stores being hit hardest, retail executives say.

Best Buy

BBY -5.03%

says it isn’t locking up more items overall than in the past, but continues to do so where needed.

It is a tactic that risks annoying customers and investors. In July a Best Buy analyst recommended selling the company’s stock after he observed conditions in dozens of stores and found items locked up or missing from shelves.

At Best Buy stores, less than 5% of its products are locked up or in backrooms for theft-protection reasons, about the same percentage as previous years. A Best Buy store in Lone Tree, Colo.



Photo:

David Zalubowski/Associated Press

“Putting products in cages certainly deters theft, but it probably hinders sales,” said R5 Capital CEO

Scott Mushkin

in the report titled “Heartbreaking.” Some stores, like one in Danbury, Conn., were in good shape, said the report, while others were messy or didn’t have enough items easily available for shoppers to buy.

Best Buy declined to comment on the research.

Around $69.9 billion worth of products were stolen from retailers in 2019, according to the most recent data from the Retail Industry Leaders Association, which surveyed members.

Theft surged after stores reopened early in the pandemic, retail industry executives say. In part, the rush to buy more online during that period led to more demand online for stolen goods, they say. In some cases stores have been understaffed due to the tight labor market or staffing choices, which means fewer watchful eyes, say some executives. In addition, well-organized theft groups working regionally have become prevalent, making the problem harder to solve than run-of-the-mill shoplifting.

Many retailers use a risk algorithm to determine which items to lock up and in what locations. A high-value item that is frequently stolen is a good candidate, say executives. Retailers often try other deterrents first, like moving a product closer to staffed registers, attaching an alarm that is removed at checkout or using more visible security staff.

Less-expensive items can get similar treatment. “For a store to be locking things up like toothpaste, Spam or honey, they would have had to have been repeatedly targeted over a period of time,” said

Ben Dugan,

director of organized retail crime at

CVS Health Corp.

and president of the Coalition of Law Enforcement and Retail, a group that facilitates planning between retailers and law enforcement.

Home Depot

has been locking up more products during the past 12 months as a stopgap while testing more customer-friendly, higher-tech solutions, according to the company.

“It’s a triage-type scenario. It’s stop the bleeding and give yourself some time,” said

Scott Glenn,

vice president of asset protection at Home Depot.

Overall theft attempts at Home Depot continue to rise compared with before the pandemic, Mr. Glenn said. Shoppers don’t like when items are locked and Home Depot tries to avoid it, he said. But after a high-theft item is locked up, sales gradually go up because the store stays more consistently in-stock, Mr. Glenn said. In stores where Home Depot has aggressive theft deterrents, it has reduced loss to theft, he said.

Best Buy has long locked up some products as a large retailer of high-value electronics, say executives. Across all U.S. stores, less than 5% of its products are locked up or in backrooms for theft-protection reasons, about the same percentage as previous years, said

Damien Harmon,

executive vice president of omnichannel for the company.

Included in the 5% figures is a tactic Best Buy started using last winter as retail theft jumped, he said. The company replaced some products on shelves with QR codes so shoppers could scan, then head to registers to pay and pick up the product.

In some locations including the Houston Best Buy—which sits in an area where many local stores face elevated levels of crime, according to data from the local police department—the share of locked items can be higher. Shopper Mr. Pearce said he understood the extreme measures given the threat of theft.

Best Buy’s store inventory is being held differently than it has in the past, with less on floors due to more buying online, said Mr. Harmon. Products are brought to shoppers directly, which has the added benefit of also reducing theft, said Mr. Harmon.

After an item is locked, Best Buy watches sales trends and doesn’t get many comments about products being locked up, said Mr. Harmon. The company is also experimenting with training store staff to stand near high-theft items, he said. Its internal customer experience scores for stores are at a 15-year high, said a spokeswoman.

InVue, a Charlotte, N.C., company that sells retailers locked glass cabinets, tracking sensors and software, late last year started getting requests from retailers asking for more customer-friendly options, said

Chris Gibson,

InVue’s chief product and marketing officer.

InVue is pitching more automated solutions that are more aesthetically pleasing or make it easier for store workers or shoppers to unlock a product quickly. Locking down products “became this draconian thing” during the pandemic, said Mr. Gibson. “A lot of our partners are saying, maybe that was a bridge too far.”

Browsing videogames at the local Best Buy used to be fun, said

Zion Grassl,

a 30-year-old video producer for a videogame website. Over the summer his local Best Buy in Eugene, Ore., removed the physical videogames from store shelves, he said, swapped with photocopy images of the front of the box that provide less information about the game.

Mr. Grassl said he understands the need to protect products from theft, but the change ruins the experience of browsing for something you didn’t know you needed.

“You still have this physical representation to look at, but it’s almost like they don’t want you to come in anymore,” he said.

Best Buy declined to comment on Mr. Grassl’s views.

Write to Sarah Nassauer at Sarah.Nassauer@wsj.com and Benoît Morenne at benoit.morenne@wsj.com

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Business

Ryan Cohen’s Stock Sale Is No Problem for Bed Bath & Beyond’s True Believers

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A stupefying rally in

Bed Bath & Beyond Inc.’s

BBBY -40.54%

stock came skidding to a halt last week when one of the company’s biggest shareholders cashed out. 

Now, a crowd of individual investors say they are hoping to ride out the worst of the selloff.

Even as Bed Bath & Beyond slumped Friday in its worst one-day pullback ever, individual investors continued to cheer the stock on social-media platforms like Reddit, Discord and

Twitter.

Many posted emojis of diamonds and hands—internet shorthand for someone who holds steadfast to their investments even when there is rising pressure to sell. Others tagged their posts with “HODL”: hold on for dear life. 

Their message to the world? We aren’t giving up.

Wil Lobach, a 39-year-old investor from New Jersey, said he is hoping to use the selloff as a way to add to his Bed Bath & Beyond holdings. 

He owns more than 250 shares of the struggling retailer. Having scooped them up at an average price of around $6.50, he is still up about 70% on his initial investment. Bed Bath & Beyond shares fell 41% Friday to $11.03.

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Mr. Lobach said the volatility in the stock last week did little to scare him. He also owns stakes in meme stocks

GameStop Corp.

and

AMC Entertainment Holdings Inc.

, both of which are also known for their wild swings. 

“I’m proud of him,” Mr. Lobach said of billionaire investor

Ryan Cohen,

whose sale of his stake triggered the selloff in Bed Bath & Beyond’s shares last week. 

Cohen’s “army is right behind him,” Mr. Lobach added, noting that he supports the sale and believes Mr. Cohen isn’t done with Bed Bath & Beyond yet. “It’s been incredible to be a part of this moment in history.” 

Mr. Cohen, the co-founder of pet-supply retailer

Chewy Inc.

, has developed a devoted following of individual investors, who cheered his rapid ascension last year from activist investor to GameStop chairman. Many individuals piled into Bed Bath & Beyond’s shares after he revealed a sizable stake in the company in March and issued a letter to its board pushing for major changes.

David Simpson, a 30-year-old from Seattle, said he is committed to holding on to his Bed Bath & Beyond investment until at least 2023, by which time he believes the stock will have risen to around $200. 

After years of declining sales, Bed Bath & Beyond is facing an existential crisis. WSJ’s Suzanne Kapner explains why the company has fallen on hard times and looks forward to what is next for the veteran retailer. Photo Illustration: Laura Kammermann/WSJ

He wasn’t deterred by news of Mr. Cohen selling his stake. In fact, he says his conviction in his Bed Bath & Beyond trade has only gotten stronger. He referenced Mr. Cohen’s role in Chewy’s growth from a small startup into a company that would later be acquired by PetSmart for $3.35 billion, a deal that was at the time the biggest e-commerce acquisition ever.

“My instincts tell me the same is true” for Bed Bath & Beyond, Mr. Simpson said, adding that he believes the company will be able to strengthen its financial position by the end of the year.

Bed Bath & Beyond is searching for a $375 million loan to build cash and help pay down debt, The Wall Street Journal previously reported. In June, the company said sales for the current quarter were trending down 20% from the year-earlier period.

Individual investors’ resolve is the latest twist in a meme-stock mania that has endured much longer than many professional investors and analysts could have ever predicted. Some individual investors say they have good reason to believe the shares will spike again.

Many are also continuing to hold out for what they believe will be a massive short squeeze, a phenomenon that occurs when a stock rises so much that investors who bet against it are forced to buy back shares, driving the stock even higher.

At the moment, those betting on the stock face an uphill battle.

On Friday, the selloff hitting Bed Bath & Beyond spread to other meme stocks, with GameStop losing 3.8%, AMC Entertainment falling 6.6% and

Coinbase Global Inc.

shedding 11%. The S&P 500 finished down 1.3%. 

Data also show pressure from short sellers has continued to grow.

Roughly half of Bed Bath & Beyond’s shares that were available to trade Friday afternoon were being shorted, according to

Ihor Dusaniwsky,

head of predictive analytics at S3 Partners, a technology and data analytics firm.

“This has been a roller-coaster week,” Mr. Dusaniwsky said in an email, noting the value of short sellers’ positions was down hundreds of millions of dollars in the first half of the week, only to jump hundreds of millions of dollars on Thursday and Friday.

Wall Street analysts are also warning there could be more pain ahead for shareholders. 

Wedbush Securities analyst

Seth Basham

said he believes Bed Bath & Beyond’s stock should be trading at around $5—55% below where it closed Friday. He cut his rating for the stock to “underperform” from “neutral” in a note after Mr. Cohen made his plans to sell his stake public Wednesday.

Even if the company manages to achieve goals like fixing its inventory and supply-chain problems, its stock has surged so much that the risk-to-reward ratio for investors remains “disproportionately skewed to the downside,” Mr. Basham added.

Bed Bath & Beyond shares are still up 122% for the quarter, compared with the S&P 500, which has risen 12%.

Wells Fargo analyst Zachary Fadem, who covers Bed Bath & Beyond, is holding a price target of $3 for the stock—73% below where it closed Friday.

Among Mr. Fadem’s concerns: Foot traffic at Bed Bath & Beyond’s stores and web traffic on its site seem to be decelerating. The company is also in a financially vulnerable position. It is working with external advisers to try to strengthen its balance sheet.

“We believe the writing is on the wall that BBBY shares have again decoupled from economic reality,” Mr. Fadem said in a note.

There could be more pain ahead for Bed Bath & Beyond shareholders, Wall Street analysts warn.



Photo:

Michael M. Santiago/Getty Images

Write to Akane Otani at akane.otani@wsj.com and Caitlin McCabe at caitlin.mccabe@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Business

Why Did GameStop Stock Price Fall? Its Earnings Report Mattered After All.

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GameStop shares were down 20.2%, at $145.05, in midday trading.


Michael M. Santiago/Getty Images


GameStop

stock was falling fast on Wednesday after the company’s fiscal fourth-quarter results disappointed analysts. There’s also another elephant in the room: The company is considering selling more stock, which could dilute its shares.

GameStop stock (ticker: GME) closed down 33.8%, at $120.34. The S&P 500 index fell 0.6%, while the

Dow Jones Industrial Average

ended flat.

In a filing with the Securities and Exchange Commission, GameStop said it has been evaluating whether or not to increase the size of its previously announced $100 million at-the-market stock-sale program. The company had announced the ATM program in December, with Jefferies acting as the sales agent. The company said it didn’t sell stock as its valuation surged.

GameStop stock received a mix of downgrades, price target cuts, and raises from analysts following the report. “Many on Wall Street have wondered why GameStop has not done an ATM transaction to take advantage of the elevated share price,” Telsey Advisory Group analyst Joseph Feldman wrote. “The answer may be that its balance sheet is in great shape, with cash and cash equivalents of $635MM (incl. restricted cash of $110MM) and debt of $363MM at the end of 2020. The new commentary seems to be a signal that an ATM transaction could be on the way.”

Heading into Tuesday, Feldman had the highest price target listed by FactSet. He lowered his to $30 from $33, calling the event “anti-climactic.” On the flip side, Jefferies analyst Stephanie Wissink raised her target by 1,066% to $175. That’s the new Street-high, in case there was any doubt.

Wissink argued the moves by Chewy co-founder and GameStop board member Ryan Cohen to transform the company into more of a technology firm warrant a completely different valuation method. The company’s earnings release was paired with another trio of hires with e-commerce backgrounds, including

Amazon

alum Jenna Owens as its next chief operating officer.

Wissink wrote that she moved from basing her target on earnings before interest, taxes, depreciation, and amortization, or Ebitda, to a sales multiple that factors in a shift to e-commerce.

She also makes the point that GameStop has the potential to participate in the rise of non-fungible tokens, or NFTs, and the hosting of shoppable content streams.

“As a result, we expect store closures to persist & sales to transfer to dot com,” Wissink wrote. “Total revs may come down, but value per dollar of sales should increase if non-retail streams are realized.”

S&P Global Ratings analysts Mathew Christy and Andy Sookram wrote in a note on Wednesday that they believe the turnaround will involve sizable execution risks and possibly a material increase in its capital investment.”The recent increase and volatility in GameStop’s share price have not affected our fundamental view of its business or the risks the company faces,” they wrote. “However, we note the potential financial flexibility afforded by its improved equity market standing if it chose to raise additional capital to reposition its business or reduce its debt.”

BofA Global Research analyst Curtis Nagle maintained his $10 price objective and Underperform rating. He notes that while GameStop’s adjusted earnings per share of $1.34 beat his estimate for $1.22, he notes that the beat was driven by a large tax credit during the quarter. The company’s Ebitda came in short of his expectations by 66%.

“We continue to be very skeptical on GME’s efforts to address its long standing issue of digital disintermediation and the fact that its core market in new and pre-owned physical console gaming is shrinking at a rapid pace,” Nagle added. “GME also called out leveraging its existing digital assets like its PowerUp rewards program but this has seen declining engagement for years.”

Wedbush analyst Michael Pachter lowered his rating on GameStop to Underperform from Hold, but raised his price target to $29 from $16. While he still thinks GameStop is well-positioned to benefit from the new consoles from

Sony

and

Microsoft,

he says the short squeeze has spiked the stock to “levels that are completely disconnected from the fundamentals of the business.”

“Our downgrade isn’t a reflection of our opinion of company management, which remains very high; rather, it appears that the ‘real’ value of GameStop shares (the price willing buyers are prepared to pay in the open market) vastly exceeds the ‘fundamental’ value we believe investors expecting a financial return can reasonably expect,” he wrote.

Write to Connor Smith at connor.smith@barrons.com

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Business

GameStop stock bounces around after earnings

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GameStop Corp. stock was unsettled in the extended session Tuesday as the videogame retailer at the center of the so-called meme-stock phenomenon said it had laid the groundwork for its “transformation” and reported lower-than-expected adjusted fourth-quarter earnings and sales.

GameStop
GME,
-6.55%
shares initially rose by more than 8% after the report, but pared gains later on, and was last down 3%. The retailer said it earned $80.5 million, or $1.19 a share, in the quarter, compared with earnings of 32 cents a share in year-ago quarter.

Adjusted for one-time items, GameStop earned $90.7 million, or $1.34 a share, compared with $1.27 a share a year ago.

Sales fell to $2.12 billion, compared with $2.19 billion in the fiscal 2019 fourth quarter, reflecting store closures related to the pandemic, the company said.

Analysts polled by FactSet expected the videogame retailer to report adjusted earnings of $1.35 a share on sales of $2.21 billion.

GameStop said same-store sales rose 6.5% in the quarter, with online sales rising 175% for the quarter and 191% for fiscal 2020. The analysts surveyed by FactSet had expected same-store sales to rise 4.7% in the quarter.

The company said it “strengthened” its balance sheet and ended the year with $635 million in cash, “laying the foundation for transformation.”

In a separate press release, GameStop said it had appointed Jenna Owens as chief operating officer, with a start date of Monday, March 29. Owens was a director and distribution manager Amazon.com Inc.
AMZN,
+0.86%.

The company also named Neda Pacifico, who was an executive at Chewy Inc.
CHWY,
-1.39%,
as senior vice president of e-commerce. Pacifico also starts on Monday.

Chewy co-founder Ryan Cohen and two of his allies joined GameStop’s board earlier this year, leading to hopes he’d direct an overhaul.

GameStop’s stock is often cited as one of the meme stocks that have skyrocketed in recent months thanks to frenzied boosts from Reddit comments and social-media posts.

See also: GameStop: what’s the fun in fundamentals, ask Reddit traders on the rocket-emoji launchpad

Shares of GameStop have gained more than 800% in the past three months, compared with gains around 7% for the S&P 500 index
SPX,
-0.76%.

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Business

GameStop Earnings Are Coming. Nobody Knows What to Expect.

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GameStop stock has been on a wild ride for two months.


Justin Sullivan/Getty Images

After two months of wild trading,

GameStop

will report results for its January quarter on Tuesday. What that means for the stock is anyone’s guess.

In a note Thursday, Wedbush analyst Michael Pachter wrote that GameStop is “well-positioned to be a primary beneficiary of the new console launches.” But he thinks the stock is trading at levels that are disconnected from fundamentals. Though Pachter rates the stock at Neutral, he has a $16 price target. GameStop stock was down 0.7% to $200.27 on Friday.

By now, many Americans know why. GameStop stock was widely panned by Wall Street analysts, with the stock falling around the price of a Happy Meal a year ago. It garnered an obscene short interest, meaning hedge funds were lining up to bet on a price decline. But when short sellers get ahead of themselves, positive news can send stocks soaring as they rush to buy shares to close out their bets in the face of unlimited downside.

In the second half of last year, Chewy co-founder
Ryan Cohen
entered the mix. He revealed a stake and later called for major changes. He upped his stake in December and joined the board in January with two associates.

Keying in on the stock’s short interest, and the possibility that GameStop could find a second life as a gaming-focused e-commerce player, retail traders on Reddit’s WallStreetBets forum piled into GameStop stock. Technical quirks of options activity, the aforementioned short interest, and the newfound enthusiasm sent GameStop stock surging in January.

WallStreetBets made it to the front pages of national newspapers, and the bearish hedge funds got torched. It also kicked off a debate about short selling, as well as one about retail traders’ access to financial markets after Robinhood and other brokers temporarily limited buying of the stock due to financial requirements from their clearinghouses.

GameStop stock fell back around $40 but surged again in the past month. Though GameStop announced a hunt for a new chief financial officer, some promising e-commerce-focused hires, and a board committee chaired by Cohen to guide its transformation into a technology company, it hasn’t provided an update on sales or its prospects since its holiday sales release on Jan. 11, which signaled a disappointing December.

For the full fiscal fourth quarter, Pachter, the analyst at Wedbush, expects sales of $2.3 billion, comparable sales up 4.8% year-over-year, and adjusted earnings of $1.38 a share. He notes that GameStop’s holiday sales report indicated same-store sales were down year-over-year in December and lagged behind positive industrywide data from NPD. He notes the company has lost market share in recent periods to competitors amid a shift to internet spending.

BofA Global Research analyst Curtis Nagle wrote in a Friday note that he expects an underwhelming quarter, albeit a profitable one. He wrote that while the recent announcements related to Cohen and new hires are positive, in theory, there haven’t been actual details on cost, timeline, and impacts to earnings of a turnaround plan. He has a $10 price objective with an Underperform rating, noting that the stock’s current valuation and historic multiple would imply earnings before interest, taxes, depreciation, and amortization of $3.5 billion, about four times its peak Ebitda from 2015.

Nagle’s note included an analysis on the impact of $1,400 direct payments on the stock, the idea being that retail investors will use their latest windfall on GameStop stock. His takeaway is that the “stimmies,” as he calls them, will not impact GameStop stock going forward.

Of course, what analysts have said about GameStop stock hasn’t had much of an impact on its recent moves. A positive update on the turnaround plan could thwart the remaining bears in the near term. On the flip side, any commentary on possible stock sales could be negative. Pachter had expected short sellers to abandon their bets, with the stock returning to more fundamental-based levels. That hasn’t happened, he noted.

“Activists control the company’s board, and lead activist Ryan Cohen, founder of Chewy, intends to unveil a new strategy sometime soon,” Pachter added. “When the new strategy is revealed and we are able to evaluate it, we will revisit our estimates and PT.”

Write to Connor Smith at connor.smith@barrons.com

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Business

GameStop Stock Tumbles, but Analyst Still Sees Squeeze Potential

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GameStop shares fell mid-morning Tuesday.


Michael M. Santiago/Getty Images


GameStop

stock dropped again shortly after the market opened on Tuesday. While some short sellers appeared to cover their bearish bets in recent weeks, a short-selling expert says he still sees plenty of squeeze potential.

Shares were down 19% to $178.12 around 10:30 a.m. Such levels are still many multiples higher than the stock’s one-year low of $2.57.

Ihor Dusaniwsky, managing director at short-selling analytics firm S3 Partners, told Barron’s on Monday that his firm estimates about 8.98 million GameStop shares (ticker: GME) were recently sold short, about 16% of shares available for trading.

Dusaniwsky said over the last month, his firm has seen about 7.5 million shorts covered, meaning bearish investors bought shares to cover their bets. The bulk came over the past week, when 4.6 million shares were covered.

“GME shorts are going through a short squeeze, and the stock continues to be on of the top stocks in our short squeeze potential metric, which means the squeeze is probably going to continue if its stock price remains at these levels or higher,” Dusaniwsky added.

The company’s shares rocketed higher last week following a company announcement that Chewy co-founder Ryan Cohen has been chairing a board committee aimed at transforming the retailer into a technology business. Cohen joined the board with two associates in January, kicking off GameStop’s parabolic ascent.

GameStop said it will report fiscal fourth-quarter results on March 23. Analysts expect adjusted earnings of $1.35 a share, up from $1.27 a share in the prior fiscal fourth quarter, according to FactSet. Of course, analysts are far more bearish on GameStop than the retail investors posting on Reddit’s WallStreetBets forum. The highest price target listed by FactSet is $33, while the mean target is $14.64.

While near-term results could cool off the GameStop rally, those excited about the stock are looking far into the future. If the company provides upbeat color on its e-commerce efforts and the impact of the new gaming consoles, it could make a quarterly miss more palatable.

Write to Connor Smith at connor.smith@barrons.com

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GameStop Stock Fell So Much It Had to be Halted. That Didn’t Stop the Selloff.

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GameStop’s stock is up an impressive $1,068% so far this year.


Justin Sullivan/Getty Images


GameStop

stock dropped suddenly Monday morning, prompting a brief halt due to volatility. The stock fell wider than 15% to as low as $223.00, bounced back, and then fell even lower.

Shares of videogame retailer GameStop (ticker: GME) this month have surged back near their late January levels this month. At the close, GameStop stock was down 17% to $220.13.

The company said last week that

Chewy

(CHWY) co-founder
Ryan Cohen
and former Chewy executive
Alan Attal
were joined by Kurt Wolf, managing member and chief investment officer of activist investor Hestia Capital Management, on a new board committee aimed at transforming GameStop into a technology business.

Cohen kicked off GameStop’s run by building a roughly 13% stake in 2020 and urged the company to pivot more toward e-commerce offerings. He joined the company’s board with two associates in January, sending GameStop shares parabolic in the weeks that followed. Analysts pointed to speculative options activity and the closing of some aggressive bearish bets from hedge funds.

Last month, GameStop announced the planned departure of Chief Financial Officer
Jim Bell.
A person familiar with the matter told Barron’s at the time that the company thought it was the right time and was looking for a new executive with a technology background.

GameStop’s latest run began following a Feb. 18 Congressional hearing on trading of its stock and Robinhood. The hearing included an appearance by Keith Gill, the YouTube personality known as RoaringKitty, who has developed a following for his successful long position in GameStop stock dating back to 2019; Gill revealed in a Feb. 19 post that he doubled his GameStop holdings.

While some analysts are upbeat about the company’s turnaround prospects, the highest price target listed by FactSet is $33. That analyst, Telsey Advisory Group’s Joseph Feldman, pointed to valuation concerns, despite his “high fundamental expectations and projected multiyear benefits from the transformation.”

The company said it will report fiscal-fourth-quarter results next week. Like other so-called meme stocks favored by retail traders, such results present a risk to the company’s sky-high run-up. That said, trying to call a near-term top for GameStop has been a fool’s errand, especially for short-sellers facing unlimited downside.

Write to Connor Smith at connor.smith@barrons.com

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GameStop stock surges to highest point since January, market cap tops $17 billion

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Shares of GameStop Corp. shot higher again Tuesday, closing at its highest point since the end of January and pushing its market cap back above $17 billion.

After plunging about 90% from its highs of the meme-stock-buying frenzy in January, GameStop stock
GME,
+26.94%
has skyrocketed more than 108% in the past five trading sessions, including Tuesday’s 27% gain. Shares closed Tuesday’s regular session at $246.90, off from a record close of $347.51 on Jan. 27, and were up another 3% in after-hours trading.

GameStop shares are up more than 1,200% year to date, and more than 5,700% over the past 12 months.

Shares started spiking again Monday after GameStop announced a new  strategy committee to identify ways to accelerate its transformation, which will be led by activist investor and Chewy Inc.
CHWY,
+5.37%
co-founder Ryan Cohen.

Late Tuesday, GameStop said it will report fourth-quarter and fiscal-year earnings after the market closes March 23.

Earlier in the day, the Senate Banking Committee started hearings into financial speculation and the easy-trading practices of Robinhood and other zero-commission firms that, combined with chatter from Reddit forums, helped fuel the historic buying of heavily shorted stocks — such as GameStop and AMC Entertainment Holdings Inc.
AMC,
+13.02%
— earlier this year.

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GameStop Investors Who Bet Big—and Lost Big

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Salvador Vergara was so enthusiastic about

GameStop Corp.

GME 2.54%

in late January that he took out a $20,000 personal loan and used it to purchase shares. Then the buzzy stock plunged nearly 80%.

GameStop’s volatile ride is hitting the portfolios of individual investors like Mr. Vergara who purchased the stock in a social-media-fueled frenzy. These casual traders say GameStop was their “YOLO,” or “you only live once,” trade. They bought around its late January peak, betting it would continue its astronomical climb. While some cashed out before it crashed, others who hung onto their shares are in the red.

‘I thought it could go up to $1,000. I really believed in that hype, which was an awful thing to do,’ Mr. Vergara says.



Photo:

Farrah Skeiky for the Wall Street Journal

Mr. Vergara, a 25-year-old security guard in Virginia, started investing four years ago after deciding he wanted to retire young. To save money, he drives a 1998 Honda Civic, eats a lot of rice and lives with his dad. He stashed his savings mostly in diversified index funds, which are now valued at about $50,000. Then Mr. Vergara, a longtime reader of the WallStreetBets page on Reddit, saw others posting about buying GameStop shares and the stock’s colossal rise.

He didn’t want to touch his index-fund investments, so instead he got a personal loan with an 11.19% interest rate from a credit union and used it to fund most of his GameStop purchase. He bought shares at $234 each.

Price return, year to date, 30-minute intervals

Source: FactSet

GameStop shares started the year around $19, zoomed to nearly $350 (and almost hit $500 in intraday trading) in late January, and then began to spiral back to earth. The shares closed Friday at $52.40, down 85% from the peak close.

“I thought it could go up to $1,000. I really believed in that hype, which was an awful thing to do,” Mr. Vergara said.

He plans to hold on to the shares because he believes in the company’s turnaround, he said, and use his paycheck to cover the monthly payments on the personal loan. Once the pandemic is over, he hopes to move back to his native Philippines, live off savings and start a charity. The GameStop loss set those plans back about six months, he said.

One of the artworks by Tony Moy, whose bet on GameStop stock has lost much of its value, is inspired by ‘diamond hands,’ a phrase used to describe hanging onto your position, no matter what.



Photo:

Matt Moy

Free trading and simple-to-use apps have made it much easier for regular investors to pour money into stocks like GameStop. In a world without international travel, live entertainment and other usual pastimes, brokerage apps such as Robinhood Markets Inc. are drawing hordes of new users looking for both a diversion and a jackpot.

Before the pandemic, Patrick Wesolowski checked his portfolio once a week. Then the clients of his Chicago-area dog-walking business stopped taking vacations and started working from home, crimping his income and leaving him with lots of free time.

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With business sluggish, the 31-year-old started spending more time researching stocks to include in his $15,000 portfolio. He “lurked” on WallStreetBets, reading about other investors’ wild bets but not posting much himself. “It’s like reading ‘Florida Man’ news headlines with a Wall Street twist,” he said.

In recent months, Mr. Wesolowski found himself picking up his smartphone to check his Fidelity Investments brokerage-account balance more often. He followed the frenzy around GameStop, and when shares were approaching $300 decided to put in $3,000. Afterward, he checked his portfolio on his phone every 10 minutes. At first, watching the stock drop made him feel queasy, but then he got used to it.

“If I lose it, I lose it. I’m OK. It’s like going to Vegas,” Mr. Wesolowski said. If he still had that money, he said, he might have put it toward a personal splurge like a vacation.

Patrick Wesolowski spent more time researching stocks after the pandemic hurt his dog-walking business and bought $3,000 of GameStop shares.



Photo:

Ola Wazny

For many, GameStop represented more than just an investment. When Tony Moy bought about $1,200 of the shares, two at $379 and two more a few days later at $228, “I knew it was, intrinsically, the wrong move,” he said.

Mr. Moy wasn’t surprised when the stock quickly lost much of its value. A casual reader of WallStreetBets, he was mostly excited about the push to stick hedge funds with losses. Some hedge funds that shorted the stock—betting the price would fall—suffered big losses, though others managed to make money during the turmoil.

The trade was an outlet for Mr. Moy’s frustrations after an abysmal year, a “virtual protest” of sorts, he said. In 2020, after the pandemic shut down large gatherings, the Chicago-based artist lost most of his income from selling his work at comic conventions. He also came down with a bad case of Covid-19 that left him coughing for months. He said his more successful investing endeavors have helped him get by financially.

One of Mr. Moy’s most recent works of art is inspired by “diamond hands,” a phrase used on Reddit to describe hanging onto your position, no matter what. He is keeping his GameStop shares as a memento. “It’s going to be a little reminder to me,” he said, “of how 2020 was the year when hedge funds had a great year and everyone else was struggling.”

The recent run-up in GameStop and other stocks involved investors in opposing camps: traditional Wall Street firms and small investors bucking the system. WSJ asked the same questions to one of each about the role of WallStreetBets in the trading frenzy. Photo Illustration: Carlos Waters

Write to Rachel Louise Ensign at rachel.ensign@wsj.com

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