GameStop To Sell More Shares After Crushing Views, Naming New CEO, CFO
GameStop (GME) smashed first-quarter earnings forecasts and announced new top executives, while the election of a new chairman is expected to bring more changes to the one-time Redditt favorite. GME stock fell late on plans to sell more shares.
Estimates: Analysts expect the Grapevine, Texas-based video game retailer to post a loss of 82 cents a share, compared to a loss of $1.61 in the year-ago period, according to FactSet. Revenue is seen climbing 14% to $1.16 billion, with same-store sales up 24%.
Results: Loss of 45 cents a share on revenue of $1.28 billion, up 25% even as the number of stores was 12% lower.
The company also said it may sell up to 5 million shares from time to time, in “at-the-market” offerings. GameStop has already raised $551.7 million from an offering in April.
As of May 1, the company had $770.8 million in cash, up from $635 million on Jan. 30.
The earnings report comes as Chewy (CHWY) co-founder Ryan Cohen takes over as GameStop chairman. He has pushed to accelerate the company’s overhaul toward e-commerce, but declined to offer specifics at GameStop’s annual meeting Wednesday.
“You won’t find us talking a big game, making a bunch of lofty promises or telegraphing our strategy to the competition,” Cohen said.
Meanwhile, top C-suite executives, including the CEO, are leaving or have already left, and the board has seen a revamp too.
But on Wednesday, GameStop named Matt Furlong as CEO and Mike Recupero as CFO. Both previously worked at Amazon (AMZN). Current CEO George Sherman had already announced plans to step down.
Shares fell 8% late after closing up 0.85% at 302.56 on the stock market today. MarketSmith chart analysis shows GME stock has seen a nearly 10-fold surge since a short-squeeze trading frenzy launched the stock into the stratosphere in January.
But Wedbush analyst Michael Pachter has an underperform rating on GME stock and a 12-month share price target of 39.
“The high-profile short squeeze and ongoing retail investor enthusiasm (overdone, in our view) seen in recent months have spiked the share price to levels that are completely disconnected from the fundamentals of the business,” he wrote in a June 7 note to clients.
Still, retail investors remain bullish on GME stock, as GameStop attempts a comeback as a global e-retailer. To be sure, consumer preferences for subscription-based games make GameStop’s packaged software and pre-owned games business less relevant over time.
FactSet data show that half of GameStop’s sales come from hardware and accessories, while 39% is from software and 11% from collectibles.
Pachter says GameStop sales of gaming consoles will continue to lag, as the new consoles from Microsoft (MS) and Sony (SONY) remain supply constrained, while Switch sales will eventually decline, with Nintendo (NTDOY) yet to unveil a successor.
“Potential transformation strategies, as exemplified by the company’s new push into non-fungible tokens, have drowned out that negativity in recent months, and may continue to do so for the foreseeable future,” he wrote.
Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.
YOU MAY ALSO LIKE: