Should You Buy GameStop Ahead of Q2 Earnings? – TheStreet

September 6, 2022 by No Comments

  • GameStop will report its Q2 results on September 7. Experts expect revenue of $1.27 billion and a loss per share of 42 cents.
  • The video gaming industry is seeing decreasing demand and slumping sales.
  • Considering that GameStop does not trade according to its fundamentals, does the earnings report matter to its investors?

Figure 1: Should You Buy GameStop Ahead of Q2 Earnings?


(Read more from Wall Street Memes: 3 Reasons To Keep Holding GameStop Stock)

What to Expect From GameStop’s Q2

The Wall Street consensus is that, for its second quarter (Q2), GameStop  (GME) – Get GameStop Corporation Report will report a loss per share of 42 cents. That’s a 118% improvement from the first quarter.

And analysts expect the game retailer to report $1.27 billion in revenue.

GameStop’s management has set clear goals. The company is focused on becoming a “customer-obsessed technology company” for gaming and is actively focused on:

  1. Establishing e-commerce excellence
  2. Expanding gaming and entertainment offerings
  3. Leveraging the company’s strengths and assets
  4. Investing in new growth opportunities

Today, about 50% of GameStop’s revenue comes from the sale of hardware and accessories, while 35% comes from the sale of gaming and PC entertainment software. The remainder comes from collectibles.

Currently, the video game market is ailing. Video game publishers, console manufacturers, and chipmakers reported a slump in demand in the last quarter.

That disproved the thesis that the sector could be recession-proof.

Both Sony  (SONY) – Get Sony Group Corporation American Depositary Shares Report and Microsoft  (MSFT) – Get Microsoft Corporation Report posted a slump in their gaming sectors. Chipmaker Nvidia  (NVDA) – Get NVIDIA Corporation Report also reported a strong decline in its gaming business — this unit was down about 44% from last quarter.

GameStop’s Cash Position

Currently, GameStop has a cash position of over $1 billion, which is a considerable amount, compared to the company’s pre-Covid position of $290 million. However, part of this position is due to issuing a whopping $1.67 billion in equity last year.

Each quarter, GameStop has been burning through $300 million in cash to support its operations. If management doesn’t take any measures to curb this, GameStop’s balance sheet will suffer.

A few months ago, GameStop made drastic cuts to its staff. It also fired CFO Mike Recupero. This came after GameStop had hired more than 600 employees from the end of 2021 to early 2022.

Recently, GameStop CEO Matt Furlong reinforced his new focus on GameStop’s core strategy, stating that the company is refocusing on achieving profitability through its traditional business.

“After spending a year strengthening our assortment, infrastructure, and tech capabilities, we’re now focused on achieving profitability, launching proprietary products, leveraging our brand in new ways, …….



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