GameStop Corp., the well-known videogame retailer and meme stock, is set to release its second-quarter results after the market closes on Wednesday. The company's performance will be closely scrutinized, as it navigates the challenges posed by executive turmoil and the ever-evolving videogame industry.
Following the recent ousting of GameStop's CEO and the resignation of its CFO, concerns have arisen about the company's market share and its ability to adapt to the growing shift towards online gaming, despite having a solid cash cushion. During the previous round of quarterly results, GameStop did not hold an earnings call, leaving investors uncertain about the level of detail they can expect this time.
According to Wedbush analyst Michael Pachter, the videogame industry experienced growth in the second quarter. However, GameStop's traffic may have been impacted by the ongoing trend towards digital gaming. Pachter believes that the company's net cash reserves of approximately $1.3 billion should provide some stability while it explores new ways to achieve consistent profitability. He also suggests that if the quarterly results fall below expectations, effective management could still steer the narrative in a positive direction.
Here's what to anticipate in GameStop's upcoming report:
Based on estimates from two analysts polled by FactSet, GameStop is expected to report a loss of 14 cents per share. Estimize, a platform that collects estimates from hedge funds, academics, and other sources, predicts a slightly smaller loss of 12 cents per share. It is worth noting that GameStop has struggled to generate consistent profits over the past three years.
FactSet estimates project revenue of $1.14 billion, while Estimize forecasts slightly lower revenue at $1.13 billion.
GameStop's shares saw a 3.7% increase on Tuesday. So far this year, the stock has gained 11%, with notable fluctuations along the way. After experiencing a downward trend for much of the summer, the shares started to recover towards the end of last month.
What to Look Out For
GameStop made some significant changes recently, starting with the firing of its chief executive, Matthew Furlong, who had previously worked at Amazon.com Inc. The company also announced the appointment of Ryan Cohen, an activist investor and co-founder of Chewy Inc., as the executive chair. These changes were seen as a move to enhance long-term value creation for stockholders.
In addition, GameStop's Chief Financial Officer, Diana Saadeh-Jajeh, will be stepping down in August, with Daniel Moore taking on the role of interim principal financial officer.
Ryan Cohen's influence over GameStop has been growing since 2020, with a focus on physical stores rather than e-commerce. However, there have been challenges, particularly in the collectibles business, as the company faces tough competition and a shift towards digital, mobile, and subscription gaming.
Industry analyst Pachter predicts potential positive results for GameStop in the second quarter due to growth in hardware sales for companies like Nintendo and Sony and a strong lineup of new games and software. However, he also highlights underwhelming hardware sales from Microsoft and the threat posed by digital gaming.
Notable new game releases, such as Activision's Diablo IV and Nintendo's The Legend of Zelda: Tears of the Kingdom, are expected to have a significant impact on sales, mostly occurring digitally.