GameStop Corp (NYSE: GME) announced its fiscal Q4 and full-year 2021 financial results for the quarter ending January 29, 2022, on Thursday, March 17, 2022, with earnings coming short of analysts’ expectations but revenue beating estimates.
What to look for: The company reported a loss during the holiday quarter amid ongoing supply chain challenges and turnaround efforts. The video game retailer indicated that it plans to launch an NFT marketplace by the end of Q2 2022. Already the company is making progress in other areas like entering collaborations with PC gaming brands, unveiling a redesigned app, and attracting customers to its rewards program. CEO Matt Furlong stated that the company is in the early days of a turnaround into a "customer-obsessed technology company."
Earnings: Stockearnig’s Estimated EPS was $0.85 per share, but the company produced a surprise adjusted loss per share of $1.86. Net loss in the fourth quarter was $147.5 million or $194 per share relative to a profit of $80.5 million or $1.19 per share reported a year ago. Historical EPS performance shows that in the past 12 quarters, the company has topped estimates 22 times (61%), matched once (2%), and missed 13 times (36%).
Revenue: For the fourth quarter, the company reported net sales of $2.25 billion, beating analysts' estimates of $2.16 billion. In the same quarter a year ago, the company had revenue of $2.12 billion. The company had revenue of $6.011 billion for the full year compared to $5.09 billion a year ago. The company didn't give guidance for the current quarter and FY 2022, stating that it won't be wise to do so in its early stages of transformation. Since March 2020, the company hasn't provided guidance because of pandemic-induced uncertainty.
Stock movement: GME shares have lost 50% since the company released its last earnings release. Interestingly, following the earnings release, the company's shares have been DOWN 31 times in the past 47 quarters. So, the historical price reaction suggests a 65% probability of the share price going UP following the earnings release. According to the Stockearning algorithm, the predicted volatility on the first day is +/-8%, while the predicted volatility on the seventh day is +/-9%.
What analysts are saying: Jefferies analyst Stephanie Wissink lowered GME shares from $145 to $100 and maintained a Hold rating in the shares. The analyst told investors that Microsoft's acquisition of Activision Blizzard changed the scope of major inputs in her model, considering both companies are leading GameStop vendors. Wissink argued that the "game changer" combination of the two is likely to reshape volumes of Activision titles if it is exclusive to Xbox and "portends a more rapid transition to cloud drive IP gaming."
Ascendiant analyst Edward Woo slashed his price target in the stock from $24 to $23 and maintained a Sell rating in the share. Woo told investors in a research note that "Reddit trading" may boost the stock in the short term, but it is likely to fade by 2022 as digital risks mount due to the company's "weak" profitability outlook. According to the analyst, recent statistics from video game companies suggest that digital revenues are growing at a rapid pace. He is "extremely concerned" about the company's core video game operation's long-term prospects "once hardware sales temper as the installed base matures."
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