Jim Stop (GME) blew expectations for fourth-quarter earnings late Tuesday, marking its second positive period in the last 12 quarters. Expectations were low, but as one of the first in a retail phenomenon that has come to be called a stock meme, a retailer’s earnings reports often attract extraordinary attention. GME stock jumped in late trading.
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With physical video game sales waning, GameStop reported losses in all but one of the past eleven quarters leading to Tuesday’s results. Losses for the last two periods narrowed to 31 cents per share in the third quarter. The holiday season is historically the best quarter for video game retailers. But GameStop’s console, accessory and video game sales suffered in 2022.
Hardware and accessory sales averaged a 4.3% decline during the first three quarters of GameStop’s fiscal year 2022. Software and video game sales averaged nearly 6% over that period as gamers increasingly turned to digital downloads.
And there wasn’t a big game console release this year to help juice results, as PlayStation, Xbox and Nintendo systems have done in the past.
“Long-term headwinds include potential liquidity challenges and changing player preferences, with increasing appetite for cloud, digital mobile and subscription,” Wedbush analyst Michael Pachter wrote in a research note Thursday.
Butcher noted that Sony’s PlayStation 5 had strong sales over the holiday period, but “a large percentage of those units were sold directly to consumers.” He noted that the launch of GameStop’s non-fungible token market was disappointing. But GameStop physical collectible sales, such as Funko (FNKO) POPS!, they probably did well during the quarter.
Patcher reiterated the underperformance rating with a $5.30 price target for GME stock, which it first announced in December after its third-quarter earnings. Shares traded above $17 on Tuesday, down about 86% from their January 2021 high.
“Stocks have remained at trading levels disconnected from business fundamentals due to irrational support from some retail investors,” he wrote.
GameStop earnings
GameStop smashed expectations for its fourth-quarter results. Adjusted earnings jumped to 16 cents per share, versus a loss of 47 percent last year. Net sales fell 1.2% to $2.226 billion. Analysts had expected GameStop to report a loss of 13 cents per share with a 3.2% drop in revenue to $2.18 billion.
Hardware and accessories sales rose 4.5% to $1.24 billion. But software sales, which include new and pre-owned video game software, fell 9.5% to $1.82 billion.
GME stock
GME shares jumped 35% to 23.80 in after-hours Tuesday after the results. GameStop stock rose 4.6% to 17.65 in Tuesday’s session.
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