A Compensation Plan With Skin in the Game

GameStop Corp (GME) shares traded flat Thursday afternoon as news broke about CEO Ryan Cohen's new compensation structure. This isn't your typical executive pay package. Cohen's board-approved stock option award is entirely performance-based, meaning he gets paid nothing unless the company hits specific market capitalization and EBITDA milestones.

The structure includes nine tranches, each unlocking only when GameStop achieves increasingly ambitious targets. The first tranche vests if the company's market cap reaches $20 billion and cumulative EBITDA hits $2 billion. That's more than double the current market cap of $9.57 billion. To put Cohen's tenure in perspective, when he joined the board, GameStop's market cap stood at just $1.3 billion. The subsequent surge to $9.57 billion represents a 635% increase, though much of that came during the meme stock frenzy.

If Cohen manages to hit all nine milestones, the stock options could theoretically be worth up to $35 billion. That's a massive potential payday, but it's also massive alignment with shareholders. He wins only if they win.

The Technical Picture Looks Messy

Right now, the stock isn't exactly screaming momentum. GameStop is trading 0.8% below its 20-day simple moving average and 7% below its 100-day SMA, both bearish signals in the short to medium term. Over the past 12 months, shares have fallen 35.21% and are sitting much closer to their 52-week lows than highs.

The RSI stands at 48.28, which is neutral territory, neither overbought nor oversold. But the MACD sits below its signal line, indicating bearish pressure. So you've got mixed momentum with a bearish tilt. Key resistance sits at $24.50, while support is around $20.00.

What Analysts Are Saying

The analyst community isn't exactly bullish. The consensus rating is a Hold with an average price target of $5.05, which would represent a significant drop from current levels around $21.39. Wedbush has been particularly skeptical, maintaining an Underperform rating with a target of $13.50 after adjusting their view multiple times.

Investors are looking ahead to the next earnings report on March 24. Analysts expect EPS of 31 cents, up from 30 cents year-over-year, and revenue of $1.47 billion, up from $1.28 billion. The stock trades at a P/E ratio of 24.2x, which analysts consider fair valuation. The expected 3% earnings growth seems to justify the current multiple, but it's hardly the explosive expansion that would get momentum traders excited.

Strengths and Weaknesses

Looking at the company's fundamental scores, there's an interesting split. The Momentum score is weak at just 8.94 out of 100, confirming what the technicals already showed: this stock is underperforming the broader market. But the Value score sits at a strong 71.74, suggesting GameStop trades at a reasonable valuation relative to peers. Most intriguingly, the Growth score comes in at 96.24, indicating substantial potential for future expansion.

So the verdict is mixed. GameStop has growth potential and decent valuation, but it's struggling to gain traction with investors right now.

ETF Exposure Matters

GameStop carries significant weight in several ETFs, which creates an interesting dynamic. The VanEck Video Gaming and eSports ETF (ESPO) holds GME at 4.54% weight, while the SPDR S&P Retail ETF (XRT) has a 1.54% allocation. The AGF US Market Neutral Anti-Beta Fund ETF (BTAL) holds a smaller 0.47% position.

This matters because when these ETFs see significant inflows or outflows, fund managers must automatically adjust their holdings, forcing buying or selling of GameStop shares regardless of the company's fundamentals.

The Bottom Line

Ryan Cohen has placed a massive bet on himself and GameStop's future. The performance-based compensation plan aligns his interests with shareholders, but the targets are ambitious given where the company stands today. With shares trading near 52-week lows, bearish technicals, and skeptical analysts, the turnaround story has a lot to prove. The March 24 earnings report might provide some answers about whether this meme stock can transform into a genuine growth story.

GME Price Action: GameStop shares were up 0.47% at $21.39 at the time of publication on Thursday.