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Why Is GameStop (GME) Up 6.5% Since Last Earnings Report?
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A month has gone by since the last earnings report for GameStop (GME - Free Report) . Shares have added about 6.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is GameStop due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
GameStop Loss Narrows in Q1, Revenues Decline Y/Y
GameStop posted first-quarter fiscal 2023 results, delivering a narrower-than-expected loss per share and weaker-than-expected revenues. The bottom line fared better year-over-year, while the top line deteriorated from the year-earlier quarter’s reported figure.
Q1 in Details
GameStop posted an adjusted loss of 14 cents per share in first-quarter fiscal 2023, narrower than the Zacks Consensus Estimate of a loss of 17 cents. The company had incurred an adjusted loss per share of 52 cents in the prior-year quarter.
GME reported net sales of $1,237.1 million, which missed the Zacks Consensus Estimate of $1,341 million. Also, the metric declined from $1,378.4 million reported in the year-ago fiscal quarter. Management highlighted that the decline in sales from new gaming software releases and lower sales of pre-owned software and hardware, as well as collectibles, were attributed to the top-line decline.
Margins
Gross profit decreased to $287.3 million from $298.5 million posted in the year-ago fiscal quarter. Selling, general and administrative (SG&A) expenses declined to $345.7 million from $452.2 million reported in the year-ago quarter. As a percentage of net sales, SG&A expenses came in at 27.9%, down from 32.8% reported in the year-ago period.
The company’s adjusted operating loss was $51.2 million in the reported quarter. It had reported an adjusted operating loss of $153.7 million in the prior-year fiscal period.
Other Financial Aspects
GameStop ended the first quarter with cash and cash equivalents of $1,057 million, long-term debt of $26.3 million and stockholders’ equity of $1,271.6 million. Inventory was $759.5 million at the end of the reported quarter compared with $917.6 million at the close of the same quarter last year. This reflects the company’s ongoing focus on maintaining a healthy inventory position.
During the first quarter, the company used cash flow from operations of $102.7 million compared with an outflow of $303.9 million during the same period last year. Free cash flow at the end of the reported quarter came in at negative $111.8 million. Capital expenditures in the quarter amounted to $9.1 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
The consensus estimate has shifted 36% due to these changes.
VGM Scores
At this time, GameStop has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, GameStop has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
GameStop belongs to the Zacks Retail - Consumer Electronics industry. Another stock from the same industry, Best Buy (BBY - Free Report) , has gained 6.9% over the past month. More than a month has passed since the company reported results for the quarter ended April 2023.
Best Buy reported revenues of $9.47 billion in the last reported quarter, representing a year-over-year change of -11.1%. EPS of $1.15 for the same period compares with $1.57 a year ago.
For the current quarter, Best Buy is expected to post earnings of $1.07 per share, indicating a change of -30.5% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.4% over the last 30 days.
Best Buy has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.
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Why Is GameStop (GME) Up 6.5% Since Last Earnings Report?
A month has gone by since the last earnings report for GameStop (GME - Free Report) . Shares have added about 6.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is GameStop due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
GameStop Loss Narrows in Q1, Revenues Decline Y/Y
GameStop posted first-quarter fiscal 2023 results, delivering a narrower-than-expected loss per share and weaker-than-expected revenues. The bottom line fared better year-over-year, while the top line deteriorated from the year-earlier quarter’s reported figure.
Q1 in Details
GameStop posted an adjusted loss of 14 cents per share in first-quarter fiscal 2023, narrower than the Zacks Consensus Estimate of a loss of 17 cents. The company had incurred an adjusted loss per share of 52 cents in the prior-year quarter.
GME reported net sales of $1,237.1 million, which missed the Zacks Consensus Estimate of $1,341 million. Also, the metric declined from $1,378.4 million reported in the year-ago fiscal quarter. Management highlighted that the decline in sales from new gaming software releases and lower sales of pre-owned software and hardware, as well as collectibles, were attributed to the top-line decline.
Margins
Gross profit decreased to $287.3 million from $298.5 million posted in the year-ago fiscal quarter. Selling, general and administrative (SG&A) expenses declined to $345.7 million from $452.2 million reported in the year-ago quarter. As a percentage of net sales, SG&A expenses came in at 27.9%, down from 32.8% reported in the year-ago period.
The company’s adjusted operating loss was $51.2 million in the reported quarter. It had reported an adjusted operating loss of $153.7 million in the prior-year fiscal period.
Other Financial Aspects
GameStop ended the first quarter with cash and cash equivalents of $1,057 million, long-term debt of $26.3 million and stockholders’ equity of $1,271.6 million. Inventory was $759.5 million at the end of the reported quarter compared with $917.6 million at the close of the same quarter last year. This reflects the company’s ongoing focus on maintaining a healthy inventory position.
During the first quarter, the company used cash flow from operations of $102.7 million compared with an outflow of $303.9 million during the same period last year. Free cash flow at the end of the reported quarter came in at negative $111.8 million. Capital expenditures in the quarter amounted to $9.1 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
The consensus estimate has shifted 36% due to these changes.
VGM Scores
At this time, GameStop has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, GameStop has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
GameStop belongs to the Zacks Retail - Consumer Electronics industry. Another stock from the same industry, Best Buy (BBY - Free Report) , has gained 6.9% over the past month. More than a month has passed since the company reported results for the quarter ended April 2023.
Best Buy reported revenues of $9.47 billion in the last reported quarter, representing a year-over-year change of -11.1%. EPS of $1.15 for the same period compares with $1.57 a year ago.
For the current quarter, Best Buy is expected to post earnings of $1.07 per share, indicating a change of -30.5% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.4% over the last 30 days.
Best Buy has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.