It’s well-known GameStop (NYSE:GME) has a rabid and loyal investor fanbase, but the relationship appears to be one-sided. The video game retailer’s management offers little in return, with no earnings calls or forward guidance to keep investors informed.
With GameStop about to report its fiscal second quarter results tomorrow (Tuesday) after the close, Wedbush analyst Michael Pachter expects the firm will be dishing out more of the same treatment.
“Management continues to shun investor interaction, forgoing the customary conference call and Q&A session that typically accompanies earnings releases,” the analyst said. “The company has not provided formal sales or earnings guidance since 2019, and does not help investors understand the pace of store closures or the performance of new revenue categories.”
For the quarter, Pachter is calling for net sales of $900 million, amounting to a 22.7% year-over-year drop and EPS of $(0.01), compared to consensus at $896 million and $(0.09), respectively.
The anticipated “modest sequential improvement” to the profit profile is primarily due to higher interest income from two share offerings, totaling 120 million shares, which brought the company approximately $3 billion in cash, or about $7 per share.
Industry sales were roughly the same as during the year-ago period, with declines in hardware sales countered by a solid lineup of software releases. But while Pachter thinks GameStop may have benefited from “stable industry sales,” the continued shift towards digital probably resulted in an underperforming quarter.
In fact, Patcher makes the case that the company’s planned return to growth is faced with a “near insurmountable barrier” of various headwinds. These include the ongoing shift from physical to digital game sales, declining game sales due to the rise of microtransactions, the expansion of subscription services, a drop in hardware sales as streaming services gain traction, and the company’s “total lack of any strategy to enter new categories with growth potential.”
“GME shares trade at a level that ignores the company’s many challenges ahead,” Pachter summed up, maintaining an Underperform (i.e., Sell) rating on the shares along with an $11 price target. That figure factors in a 54% drop from current levels. (To watch Pachter’s track record, click here)
No other analysts appear to be currently tracking GME’s progress with Pachter’s rating the sole one on file. (See GameStop 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.
