In a deja vu moment echoing 2021, GameStop (NYSE:GME) once again sent investors on a wild ride. Over just the past two trading sessions, the video game retailer’s stock took a staggering nosedive of ~47%.
The funny thing about that, however, is that the volatility has been so extreme for the meme stock king that, following the drop, the shares were back trading roughly where they were last Tuesday.
The latest violent move, part of a series of surges and pullbacks since Roaring Kitty’s reappearance, followed a disappointing Q1 report on most metrics.
In the quarter, revenue declined by 28.7% compared to the same period a year ago, landing at $881.8 million, thereby missing the Street’s forecast by $113.5 million. Likewise at the bottom-line, adj. EPS of -$0.12 fell short of expectations by $0.03.
Given the company continues to shut stores and lower expenses, SG&A (selling, general and administrative) dropped meaningfully to $295.1 million vs. the $345.7 million of the year-ago period, although that represented 33.5% of Q1 sales compared to 27.9% in 1Q23.
The company saw out the quarter with $1.03 billion of cash and marketable securities, dropping from $1.2 billion in 4Q23. GameStop also announced another open market sale of 75 million shares, following a previous sale of 45 million shares.
Baird’s Colin Sebastian, an analyst ranked in the top 3% of Wall Street stock pros, doesn’t find much to praise in the latest report. While Sebastian does suggest a potential path forward for the company, he ultimately advises investors to steer clear.
“GameStop’s disappointing Q1 results underscore ongoing challenges to the company’s retail business model. Moreover, we have limited confidence in the company’s ability to restore growth and drive further operating efficiency,” the 5-star analyst said. “However, we believe a smaller store footprint with a modernized consumer experience could eventually find an equilibrium point. We expect bulls would point to new hardware and expected release of GTA VI next year as upcoming catalysts. However, with management providing limited information and with ongoing business model concerns, we cannot recommend buying the stock at these levels.”
Given GME shares are prone to move because of “non-fundamental trading, social media influences and other factors,” Sebastian has suspended his rating and price target for stock for the time being. (To watch Sebastian’s track record, click here)
On Wall Street, only one other analyst remains tracking GME’s progress, and they recommend a Sell. (See GME stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
