The bloom appears to be off the rose for video gaming retailer GameStop (GME), which recently posted earnings that featured an outright drop in revenue. That, in turn, left investors wondering if plans to revive GameStop could actually succeed, and shares plummeted nearly 15% in Wednesday afternoon’s trading.
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The biggest hit came from GameStop’s revenue, which was down 31.9% in the latest quarter. While GameStop also shored up a lot of its own spending, such that it could actually show net profit, that substantial drop in revenue left a lot of investors wondering if GameStop actually could turn around at all. What it could control, it did, and apparently to great effect. But there are several factors outside its control, like the growth of digital game sales.
Meanwhile, the rise of Reddit investors and other such operations that made GameStop effectively a “meme stock” had less impact. While GameStop shares doubled for a while back in May, thanks to the return of Keith “Roaring Kitty” Gill, those shares lost about 40% just weeks later when the livestream Gill put on did little to get investor attention.
Big Moves Afoot
While many investors are questioning whether GameStop can recover, there are signs that GameStop has some very big moves waiting in the shadows that may change things. A new report filed with the Securities and Exchange Commission (SEC) says that GameStop is engaging in a “review of its international business” and will take a closer look at “underperforming” assets in the United States.
GameStop revealed that “…we anticipate that it may result in the closure of a larger number of stores than we have closed in the past few years.” A surprise, perhaps, though not a big one. With digital downloads accounting for 70% of all game sales in 2022, according to Forbes, GameStop’s primary stock in trade is on the ropes at best.
Is GameStop a Buy or Sell?
Turning to Wall Street, only one analyst, Michael Patcher from Wedbush, is covering GME stock and has a Sell rating. According to him, there is more than 44% downside risk for GameStop based on his price target of $11 per share.
