After the market close, GameStop Corporation (NYSE: GME) has confirmed that it will release its Q3 2021 earnings results on December 8, 2021.
What to look for
GameStop has struggled to turn around its finances, and for the past three consecutive years, the company reported negative earnings per share. Interestingly, retail investors are ready to pay high prices for the stock allowing it to raise almost $1 billion in cash, and low-cost capital has raised hopes that GameStop will generate profits soon. However, the shift in consumer preference has seen the company's revenue drop at a compounded annual rate of 6% in the last ten years, leading to losses impacting its bottom line.
Earnings: Stockearning’s Estimated EPS for the third quarter is expected to be a loss of $0.4 per share compared to a loss of $0.29 per share reported a year ago. Historical EPS performance shows that in the past 12 quarters, the company has beat EPS estimates six times (50%) and missed six times (50%).
Revenue: For the current quarter under review, the company expects revenue to increase to $1.189 billion, up 18% YoY from $1.005 billion in Q3 2020. However, this may be slower than the topline growth of 25.5% in Q2 2021, and investors will be looking at how sales fared during Cyber Monday and Black Friday. In the second quarter, the company had sales of $1.2 billion, increasing from $942 million reported a year ago when sales were depressed because of pandemic-related restrictions.
Stock Movement: Since the last earnings release, GameStop stock has lost 13.3%. GameStop shares have been DOWN 30 times out of the past 46 quarters after the earnings release. So, the historical price reaction suggests a 65% probability of the share price going DOWN once GameStop releases earnings. According to the Stockearning algorithm, the predicted first-day move is 7%, while the predicted move on the seventh day is 9%.
What Analysts are saying
Wedbush Securities analyst Michael Pachter reiterated a "Sell" rating on the stock when the company released its Q2 2021 earnings. However, the analyst sees the company as better positioned to be the beneficiary of new console launches, and he is optimistic that it will return to profitability.
Also, Ascendiant analyst Edward Woo maintained a “Sell” rating on the stock but lowered the price target from $25 to 24. The analyst said that Reddit trading would propel the stock in the short term, but that is likely to wan in a year as GameStop’s digital threats increase. Woo told investors in a research note that because of the popularity of the stock on Reddit boards and among Robinhood retail investors, the stock doesn't trade in fundamentals metrics or valuations, “but ion retail investors’ sentiment, hope, momentum and power of crowds.”!
Recently Baird analyst Colin Sebastian temporarily suspended his "Hold" rating on the stock and the previous price target of $25, pending GameStop's business strategy clarity. The analyst told investors that the recent stock volatility is associated with "non-fundamental trading, social media influences and other factors."
Related News
Dollar General (NYSE: DG) Earnings Expectations, EPS of $2.02 in Q3 2021
Royal Bank of Canada (NYSE: RY) Earnings Expectation, 58% chance for share Going UP After Earnings Release