GameStop on Wednesday reported 25% sales growth, reduced losses and the appointment of former Amazon CEOs to top management positions. However, this does not compensate for the company’s problems, which intends to sell up to 5 million additional shares.
Shares of GameStop (GME), a major retail chain of goods for gamers, fell 5.2% in non-trading time after the release of a quarterly report and news of the beginning of an investigation by the US Securities and Exchange Commission (SEC).
GameStop’s current investors perceive the company’s financial performance in the context of its reorganization to move to a digital selling model, as well as the valuation of its shares by the stock market.
GameStop’s stock on Wall Street is dubbed a “meme stock” after speculative gains since early 2021. From a low of $ 3.77 per share in the summer of 2020, GameStop shares jumped to a high of $ 483 during trading on January 28. Market experts said that such growth is not related to the fundamental financial fundamentals and prospects of the company itself.
Wedbush analyst Michael Pachter rates Game Stop shares as “below market” with a target price of $ 39, announcing on Monday that the current price has been raised “to levels that are completely out of touch with business fundamentals.”
GameStop’s share price was $ 302.56 at the close of trading on Wednesday.
And while GameStop reported higher quarterly results than analyst average forecasts, the stock fell sharply after the close.
GameStop Quarterly Data
GameStop posted a loss of $ 66.8 million for the first fiscal quarter of 2021 ended May 1, which is almost three times lower than last year’s value of $ 165.7 million.
Loss per share was $ 0.45 versus $ 0.84 expected by analysts.
Revenue also rose 25% year-on-year to $ 1.28 billion, also better than analysts’ median forecasts of $ 1.16 billion.
These numbers are significantly lower compared to the previous quarter, but the fourth holiday quarter is seasonally strongest for retailers. GameStop’s quarterly earnings and earnings statistics for the last 2 years are available here.
On Wednesday, GameStop announced historic changes to its leadership that could provide new impetus for the company’s growth.
The new CEO of GameStop on June 21 will be Matt Furlong, who oversaw Amazon.com’s business in Australia.
The new CFO of GameStop will be appointed on July 12
Mike Recupero, who most recently served as Amazon’s Chief Financial Officer for Consumer Business North America.
GameStop also said it could sell up to 5 million shares from time to time through market offerings. The company is selling these additional shares in order to attract more free investment to grow its business. Thus, GameStop has already received $ 551.7 million as a result of its placement of shares in April.
However, for investors, the issuance of additional shares by the company may mean a decrease in the value of the shares.
What’s wrong with GameStop and its promotions? Analysis of stocks by market analysts
Market experts say that the company’s problems are not in losses or bad leaders, but in the business model itself.
“We’re still in a phase where results don’t matter given what’s going on,” said Matthew Canterman, an analyst at Bloomberg Intelligence. “Obviously, people are still interested in GameStop’s ability to move to a broader e-commerce platform than the average console game retailer.”
The decline in GameStop stock since 2014 is due to the fact that over the years the company still operated thousands of physical stores, which gave way to the online games industry.
Loop Capital analyst Anthony Chukumba declined to assess GameStop shares earlier this year after insane speculative trading.
He stated in an interview with CNBC that “GameStop’s problems have very little, if anything, to do with e-commerce. The problem is that gamers are increasingly downloading video games. They can hire Jeff Bezos, but it won’t matter. “
GameStop does not disclose reorganization forecasts and plan to investors
GameStop released a report on Wednesday without holding online Q&A conferences like in the previous quarter.
The company also did not provide a detailed plan for the reorganization, as required by traditional practice, saying only that it seeks to increase shareholder value, pay off debt and “lay the foundation for long-term growth.”
GameStop’s new chairman of the board Ryan Cohen said, “You won’t see us playing a big game, making a bunch of high promises or telegraphing our strategy to competitors.” “We have a lot of work ahead of us and it will take time,” he added.
SEC investigation into speculative trading in GameStop stock
GameStop said Wednesday that it had received a request from the US Securities and Exchange Commission (SEC) on May 26 to voluntarily provide documents and information. The company said it is reviewing the request and plans to collaborate.
GameStop also said it does not expect the investigation to negatively impact it.
Marketinfo.pro wrote about the risks for companies that speculative trading and the issuance of additional shares during this period may entail in the article “Why did GameStop not take advantage of the insane rise in shares?”.