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Why Is GameStop (GME) Down 22.1% Since Last Earnings Report?
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It has been about a month since the last earnings report for GameStop (GME - Free Report) . Shares have lost about 22.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is GameStop due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
GameStop Q2 Loss Narrower Than Expected, Revenues Up Y/Y
GameStop posted second-quarter fiscal 2023 results, delivering a narrower-than-expected loss per share and better-than-expected revenues. The top and bottom lines increased from their respective year-ago quarter’s reported figures.
Q2 in Details
GameStop posted an adjusted loss of 3 cents per share in second-quarter fiscal 2023, narrower than the Zacks Consensus Estimate of a loss of 15 cents. The company had incurred an adjusted loss per share of 35 cents in the prior year quarter.
GME reported net sales of $1,163.8 million, which surpassed the Zacks Consensus Estimate of $1,143 million. Also, the metric increased from $1,136 million reported in the year-ago fiscal quarter. Management highlighted that a significant software release and increased sales of new gaming hardware in international segments contributed to the top-line growth, partially offset by a decline in sales of collectibles.
By sales mix, hardware and accessories sales inched up to $597 million from $596.4 million reported in the year-ago quarter. Software sales came in at $397 million, up from $316.4 million in the prior year quarter. Sales in the collectibles unit amounted to $169.8 million compared with $223.2 million reported in the year-ago quarter.
Margins
Gross profit increased to $305.9 million from $282.2 million in the year-ago fiscal quarter. Selling, general and administrative (SG&A) expenses declined to $322.5 million from $387.5 million reported in the year-ago quarter. As a percentage of net sales, SG&A expenses came in at 27.7%, down from 34.1% reported in the year-ago period.
The company’s adjusted operating loss was $20.7 million in the reported quarter. It had reported an adjusted operating loss of $106.2 million in the prior-year fiscal period. Adjusted EBITDA was $1 million compared with an adjusted EBITDA loss of $78.1 million in the prior-year quarter.
Other Financial Aspects
GameStop ended the second quarter with cash and cash equivalents of $894.7 million, long-term debt of $23.6 million and stockholders’ equity of $1,267.2 million. Inventory was $676.9 million at the end of the reported quarter compared with $734.8 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 second quarter, the company used cash flow from operations of $109.1 million compared with an outflow of $103.4 million during the same period last year. Free cash flow at the end of the reported quarter came in at a negative $119.2 million. Capital expenditures in the quarter amounted to $10.1 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 32.08% due to these changes.
VGM Scores
Currently, GameStop has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. 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. It comes with little surprise GameStop has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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Why Is GameStop (GME) Down 22.1% Since Last Earnings Report?
It has been about a month since the last earnings report for GameStop (GME - Free Report) . Shares have lost about 22.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is GameStop due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
GameStop Q2 Loss Narrower Than Expected, Revenues Up Y/Y
GameStop posted second-quarter fiscal 2023 results, delivering a narrower-than-expected loss per share and better-than-expected revenues. The top and bottom lines increased from their respective year-ago quarter’s reported figures.
Q2 in Details
GameStop posted an adjusted loss of 3 cents per share in second-quarter fiscal 2023, narrower than the Zacks Consensus Estimate of a loss of 15 cents. The company had incurred an adjusted loss per share of 35 cents in the prior year quarter.
GME reported net sales of $1,163.8 million, which surpassed the Zacks Consensus Estimate of $1,143 million. Also, the metric increased from $1,136 million reported in the year-ago fiscal quarter. Management highlighted that a significant software release and increased sales of new gaming hardware in international segments contributed to the top-line growth, partially offset by a decline in sales of collectibles.
By sales mix, hardware and accessories sales inched up to $597 million from $596.4 million reported in the year-ago quarter. Software sales came in at $397 million, up from $316.4 million in the prior year quarter. Sales in the collectibles unit amounted to $169.8 million compared with $223.2 million reported in the year-ago quarter.
Margins
Gross profit increased to $305.9 million from $282.2 million in the year-ago fiscal quarter. Selling, general and administrative (SG&A) expenses declined to $322.5 million from $387.5 million reported in the year-ago quarter. As a percentage of net sales, SG&A expenses came in at 27.7%, down from 34.1% reported in the year-ago period.
The company’s adjusted operating loss was $20.7 million in the reported quarter. It had reported an adjusted operating loss of $106.2 million in the prior-year fiscal period. Adjusted EBITDA was $1 million compared with an adjusted EBITDA loss of $78.1 million in the prior-year quarter.
Other Financial Aspects
GameStop ended the second quarter with cash and cash equivalents of $894.7 million, long-term debt of $23.6 million and stockholders’ equity of $1,267.2 million. Inventory was $676.9 million at the end of the reported quarter compared with $734.8 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 second quarter, the company used cash flow from operations of $109.1 million compared with an outflow of $103.4 million during the same period last year. Free cash flow at the end of the reported quarter came in at a negative $119.2 million. Capital expenditures in the quarter amounted to $10.1 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 32.08% due to these changes.
VGM Scores
Currently, GameStop has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. 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. It comes with little surprise GameStop has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.