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GameStop board looking to replace CEO: report

Yahoo Finance’s Myles Udland and Brian Sozzi discuss the hunt for GameStop’s new CEO.

Video Transcript

MYLES UDLAND: But let's take a look at a stock that is on the move more than the major averages. That is GameStop, the stock up about 2%, or had been up about 2% in early trading, coming off of those levels about 7/10 of 1% right now and dropping as I speak. If I just keep talking here, maybe it'll go red before I even get to you, Sozz. The news here, news here for the company out last night after the bell, Reuters reporting that GameStop is on the hunt for a new CEO to replace George Sherman, who has been the company's CEO through this really chaotic period for the business.

Sozzi, I guess, the initial reaction is kind of, what took them so long to officially announce that this hunt had been underway? And yet another sign that Ryan Cohen, again, co-founder or Chewy, member of the board, nominated to be executive chairman of the board, continues to gain influences in the business.

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BRIAN SOZZI: Well, the key ingredient here, Myles, is you have to find a retail executive or any executive that wants to come in here and help fix the steaming pile of a mess that is GameStop. With thousands of stores around the globe, you have a lot of headline risk now because it's now one of the favorite meme stock trades on entire Wall Street. So those are some key considerations. They have to have the ability to attract key talent here. But all the writing is on the wall here, Myles. So I'm not surprised to see a report like this. You have Ryan Cohen clearly in control of the company, completely overhaul the board.

And you look at what Sherman does. On April 15, 2019, that is when he started as CEO of GameStop. Shares open at about $8.75 on the day he started, about. Now the stock dropped to a low of $2.83 on April 6, 2020. Part of that was because of the pandemic, but also part of that, too, was George Sherman just not getting it done. Now sure, he's an accomplished retail executive. He worked at Best Buy, he worked at Advanced Auto Parts. But still, he has failed to just reimagine this company and drive any form of life or any form of vision to the company. So it is very likely he gets shown the door and perhaps very soon.

MYLES UDLAND: And also another piece of news here, yesterday, GameStop shares were down a double digit percentage, off about 10%. The stock getting a downgrade from analysts over at Ascendiant. Bloomberg noting that GameStop now has five sell equivalent-- sell or sell equivalent ratings. You know, it could be underperform, sell, depending on exactly how your firm shakes out those ratings. Stocks still at $140 per share here. It's off about, again, 10% over just the last couple of days. Been under some pressure over the last week.

And Sozzi, the crazy thing with GameStop, every time we bring up the story, still is a $10 billion market cap, which is still, I think, 2 and 1/2 times annual sales from last year. It's still an aggressive valuation for a company that while their plan to turn around the business is starting to come into focus, still hasn't outlined too many material steps that it's going to take. It is, again, starting to remake the entire executive suite over there. But as for what GameStop will be like as it is reimagined, still some questions there and quite a premium placed on the valuation through that process.

BRIAN SOZZI: Right, Myles, and really, that $10 billion market cap has nothing to do with what George Sherman has done or hasn't done outside the company. It really is all driven by a lot of this retail trader and just action in the stock. And my analysis is very simple. I have a GameStop by my house. It looks the same as it does right now as it did about 15 years ago. So until that store starts to look different and I can start thinking about, wow, maybe GameStop will reinvent itself at thousands of other stores, it's hard to believe that any executive will come in here and turn that company around.

MYLES UDLAND: Yeah, and you also think about the leader of the meme, right? I mean, Keith Gill is still up hundreds of-- thousands of percentage points on his position in GameStop. And so, he's not-- I don't know how much he still owns or doesn't own, but he's not really feeling any pressure here. And so I think the stock story, the meme story kind of remains in place. Again, this all started when it was a $4 stock back in the summer of 2020. And it's still at $140 per share.

And so, you look at that spread between where this all started, where it's gone. I think from a share price perspective, there's a lot of room between 4 and 140 to find a value that is still a premium, still a bet on what GameStop can do in the future that doesn't necessarily involve it having a $10 billion market cap. Because, again, that is quite a multiple on trailing sales that are part of a strategy that had not really changed under current leadership and still has some work to do to gain clarity, offer clarity for markets on what happens next with that--