According to Wedbush analyst Michael Pachter, while Strategy’s stock is currently trading at approximately 1.75 times the value of its Bitcoin holdings, GameStop is trading at around 2.4 times its cash value.

GameStop’s (GME) recent pivot to Bitcoin (BTC) may be energizing investors, but Wedbush says the stock’s valuation defies logic, especially when compared to Michael Saylor-led Strategy (MSTR).

Wedbush analyst Michael Pachter reiterated his ‘Underperform’ rating on GameStop with a price target of $13.50 after the company announced it had made its first-ever Bitcoin purchase of 4,710 BTC for around $500 million last week. 

In a note to clients cited by TheFly, Pachter said GameStop appears to be “following the MicroStrategy playbook,” but that’s where the comparison stops.

According to him, while Strategy currently trades at about 1.75 times the value of its Bitcoin holdings, GameStop is trading at approximately 2.4 times its cash value. 

Based on that premium, Wedbush estimates that investors are valuing GameStop’s core business at roughly $8 per share, which is well below the current market level of around $30.

“The disparity in valuation between (the) company and Strategy is baffling,” Pachter wrote.

GameStop’s Bitcoin holdings are also a fraction of Strategy’s 580,250 BTC. While both companies provide Bitcoin investors the ability to use margin to invest in crypto, Wedbush noted that GameStop's holdings “are literally 1% as great as MSTR’s.”

The brokerage acknowledged that GameStop’s expansion into the trading card business has had “modest success,” but maintained there is little visibility into a meaningful recovery in its retail operations.

GameStop has not commented on future Bitcoin purchases, but Wedbush believes the company is likely to convert more of its cash into crypto. Still, the firm warns that the recent surge in GameStop’s stock appears more tied to speculative sentiment than fundamentals.

Strategy’s stock fell more than 1% lower in afternoon trade on Thursday amid Bitcoin’s (BTC) price dipping back to $103,600 after hitting an all-time high of nearly $112,000 in May.

Meanwhile, GameStop’s stock was trading 0.2% higher on Thursday, but the shares have fallen more than 5% this year in comparison to Strategy’s gains of 25% during the same period.

Over the past 12 months, Strategy’s stock has more than doubled in value, while GameStop’s stock gained 14%. 

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