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Author: Alan LittleDate: 2020-12-10

GameStop (GME) 16% lower after Q3 loss, 30% revenue drop

GameStop (GME) shares were down 15.76% on Wednesday after the electronics retail company posted a Q3 loss and revenue fell short of the Wall Street consensus.

Before the markets opened in midweek, GameStop came in with an adjusted $0.52 per share loss for the latest three-month period, though that was better than the -$0.85 forecast.

However, revenue slumped 30% amid challenging trading conditions, with the $1bn figure for Q3 ending up $90m shy of expectations ($1.09bn).

The nature of the decline was a surprise to analysts, and Benchmark said that there had been a “dramatic downturn” during the latest quarter.

GameStop had benefited from COVID-19-related restrictions that resulted in an explosion in video game usage from March onward.

However, Benchmark said that GameStop’s ecommerce platform was not particularly compelling and that it was now feeling the impact of a drop-off in footfall at physical stores.

Benchmark also said that the assertion that it could eventually rival Amazon (AMZN) is “comical”.

The firm has a very bearish outlook for GameStop after reducing its price target to just $5 and standing pat on a sell rating.

Baird is a bit more optimistic though after adding $8 to a new $13 PT on the company’s “laudable pivot” to digital sales.

GameStop is planning to go ahead with a $100m share offering in the future, and Wedbush, offering a neutral rating and $16 PT, said that this is “likely to weigh on shares”.

That certainly seemed the case on Wednesday, though it was the Q3 loss and revenue slump that was on the minds of investors.

At 12:30pm ET on the New York Stock Exchange, GME shares had cratered 16.94% to $14.07.

GME Stock Chart

Sources:

  • https://bit.ly/37OknJn
  • https://bit.ly/3n4tufx

 

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