On December 31, 2020, GameStop closed at $18.84. By the end of January 2021, the stock closed at an astronomically high $325, for an astounding one-month return of 1625%! A week later, the price was back down to $63.77 per share, for a one-week drop in value of 80%.

For the group project, you will perform a valuation of GameStop (GME). The accompanying spreadsheet contains financial statements and returns data for GME and capital market information. For this valuation, please make Cash & ST Investments the plug in your pro-forma analysis. Please clearly state the assumptions you are making concerning sales growth rates, cost of capital, financial ratios, etc. and why you chose them. Ultimately, you should produce a price per share for GameStop as of Dec 31, 2020 based on your assumptions.

Use your model to answer two questions:

1. The actual price for GameStop on Dec 31, 2020 was $18.84. Based on your model, would GameStop have been a BUY or a SELL at that price? You may make a conditional recommendation (for example, BUY if the stock hits $X/share etc.). The decision to short sell the stock is also a possible recommendation.
2. GameStop stock closed at $325 per share at the end of January 2021. Using your model, characterize the level of sales growth necessary to justify this share price.

Some Notes:

• Shares outstanding are 69,746,960.
• You may assume that Debt, Other Liabilities, Total Investments & Advances, Other Assets, and Capital Leases remain at their current values and that there are no unusual expenses or nonoperating gains/losses going forward.
• The aim of this project is to build your own valuation model. You are not permitted to use readymade valuation models, but you are allowed to use public financial information.