Jim Cramer Agrees GameStop Should Consider Operating As A Bank And Labels The Meme Stock As 'Massively Overvalued' SPAC

Jim Cramer has compared GameStop Corp. GME to an overvalued special purpose acquisition company.

What Happened: Cramer the host of CNBC’s “Mad Money” host criticized GameStop’s business model, suggesting it resembles a SPAC due to its reliance on raising capital despite poor business performance. He emphasized the need for GameStop to present a clear strategy to justify its stock price.

"When you think of GameStop, you need to imagine a SPAC — and not just any SPAC, it's a massively overvalued one that needs to purchase something incredible at an insane discount,” Cramer said.

GameStop reported a 31% year-over-year sales decline, marking its fourth consecutive quarter of losses. Despite this, the company turned a profit from interest on its $4.2 billion cash reserve.

Cramer echoed an analyst’s view that GameStop should consider closing physical stores and operate as a bank. He also noted that many investors hope for acquisitions that could boost the stock’s value, a bet he is unwilling to take.

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Why It Matters: GameStop’s recent financial results have been a cause for concern among investors. On Monday, the company reported second-quarter net sales of $798 million, falling short of the $895.7 million consensus estimate. The revenue miss was primarily due to lower-than-expected sales in hardware, accessories, and collectibles.

Analysts have been vocal about GameStop’s struggles. Wedbush analyst Michael Pachter reiterated an Underperform rating and suggested the company could close all its physical stores and operate as a bank to manage its losses. Pachter questioned why GameStop shares traded at a premium to its cash reserves without a clear strategy.

Adding to the volatility, the “Roaring Kitty” account, known for its influence on meme stocks, recently posted a cryptic message on X, leading to speculation and increased trading volume for GameStop shares.

Price Action: GameStop’s stock closed at $20.64 on Wednesday, down 11.98%. In after-hours trading, the stock fell a further 1.02%. Year to date, GameStop’s stock has risen 23.82%, according to data from Benzinga Pro.

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This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote