Corp. (NYSE: GME) reports earnings on Thursday, after the
market closes. However, to add to the stocks woes Wedbush Securities' analyst, Michael
Pachter, wrote a client note reiterating his underweight (SELL) recommendation
on GameStop stock at a price target of $45 per share (the company was trding at
over $92 before trading started but is now currently trading at just over $78).
On top-of-this, other factors are in-play with
ominous signs piling up that more
turmoil is still coming, as key indicators point toward a potential recession.
Ukraine-Russia crisis continued to dominate market movements, causing extreme
volatility in the financial market and pushing the oil prices to a decade high
and depressing stocks.
Federal Reserve is widely expected to hike by 25 basis points to 0.25%-0.5% on
Treasury yield curve has collapsed to near inversion -- a situation when
short-term rates exceed those with longer tenors, which has often preceded a
downturn. In Europe, energy costs have climbed to unprecedented levels, as
sanctions against Russia exacerbate a global commodity crunch.
“Over time, the three biggest
factors that tend to drive the U.S. economy into a recession are an inverted
yield curve, some kind of commodity price shock or Fed tightening,” said Ed Clissold, chief U.S.
strategist at Ned Davis Research. “Right
now, there appears to be potential for all three to happen at the same time.”About GameStop…..
GameStop Corp. engages in the retail of
multichannel video games, consumer electronics, and wireless services.
It operates through the following segments: United
States, Canada, Australia, and Europe. The United States segment includes the
retail operations and electronic commerce websites, www.gamestop.com and
www.thinkgeek.com, Game Informer magazine, and Kongregate. The Canada segment
consists of the retail and e-commerce business. The Australia segment refers to
the retail and e-commerce operations in Australia and New Zealand. The Europe
segment pertains to the retail and e-commerce operations in European countries.
The company was founded by Daniel A. DeMatteo in
1996 and is headquartered in Grapevine, TX.
Major Catalysts for
the gamestop Weekly
Its meme stock status made GameStop one of the more volatile stocks in
the past year, but Thursday's earnings announcement is an opportunity to bring
hard numbers into the conversation. The video game retailer's shares are down
so far in 2022, partly because meme stocks have lost some of their luster.
There are more practical worries about the business, too, after Best Buy
indicated recently that the video game niche slowed significantly over the
GameStop Corp. will report earnings at approximately 4:05 PM ET on Thursday,
March 17, 2022.
The consensus earnings estimate is for $0.76 per share on revenue of $2.22
billion; but the Whisper number is less at $0.52 per share.
Consensus estimates are for earnings to decline year-over-year by 43.28%
with revenue increasing by 4.61%.
Short interest has increased by 72.7% and overall earnings estimates have
been revised lower since the company's last earnings release.
At around $96 per share today, GME stock has taken a big dive from its meme
high of $483 per share.
Best Buy said in a morning press release recently that fourth-quarter
sales trends were slightly worse than management had predicted in late
The consumer electronics industry was pinched by supply chain shortages,
the rise of the omicron variant of COVID-19, and declining demand for products
in the video game niche compared to a year earlier. Each of those challenges
likely affected GameStop over the holiday selling period, too.
reported declining profitability for its fourth quarter and said that trend
might persist at least into the first half of 2022.
GameStop didn't issue any short-term guidance in its last conference
call back in early December, but most investors are looking for sales to rise
about 4% to $2.2 billion. Hitting that result would put the company roughly in
the same position it was back in 2019, although today it operates fewer stores
and has divested a few unprofitable business lines.
Management said it believed it had enough inventory on hand to satisfy
demand over the holidays. However, Best Buy (NYSE: BBY) and Walmart (NYSE: WMT)
both revealed in recent earnings announcements that the video game segment
underperformed in late 2021. The big question on Thursday will be whether
GameStop struggled to grow in that weaker environment.
rebound strategy starts with securing sustainable revenue growth as the
foundation for solid financial returns. To date, investors haven't seen much to
show that this initiative is paying off.
cash losses over the first three quarters of 2021 were $324 million compared to
$41 million a year earlier. GameStop burned through almost $300 million just in
the third quarter, and the long-term trend appears to show steady deterioration
on this key metric.
Heading into the report, most investors are looking for sales to fall
slightly in the new fiscal year as gains in e-commerce and in new initiatives
like non-fungible tokens (NFTs) and blockchain offset some of the loss from the
shrinking store base.
If management's forecast is about the same, then shareholders are
looking at a third consecutive year of annual sales below $6 billion. The
company's record was over $9 billion in 2017.
A lot has changed in the video game industry since then, but one
consistent trend has been GameStop's struggles to stay relevant to its fans as
power shifted toward hardware and software developers and away from retailers.
The pressure from that continued move will surely affect GameStop again through