GameStop remains a hot property among retail investors eager to snap up the “meme stock,” but its financial results continue to cool.
The video game seller on Friday reported a loss of $32.3 million on revenue of $882 million in its fiscal first quarter, with declining sales of hardware, software and collectibles. That compared with a loss of $50.5 million on revenue of $1.2 billion in the year-ago period.
“While the numbers were ugly (steep Y/Y drop in sales and a net loss, along w/neg. free cash flow of ~$115MM), they were largely in line w/the preannouncement from back on 5/17,” analyst Adam Crisafulli of Vital Knowledge said in a research note.
In morning trade the company’s stock fell $11.83 or 25%, to $34.73.
GameStop shares have soared in recent weeks after Keith Gill, a popular trader who touts his results online under the monikers “Roaring Kitty” and “DeepF_Value,” resurfaced on social media after a long hiatus. Earlier this month, Gill posted a screenshot in a Reddit forum showing he owns roughly $116 million in GameStop shares.
GameStop reported net sales of $5.2 billion for its 2023 fiscal year, down from $5.9 billion the previous year. But the company swung to a profit of $6.7 million in 2023, reversing a loss of $313.1 million in fiscal 2022.
The latest run-up in GameStop shares will boost its balance sheet. The company announced in May that it planned to sell 75 million shares at the prevailing market price, which Wedbush Securities analysts estimate would raise roughly $3 billion and lift its cash holdings to roughly $5 billion.
“We expect the company to continue to lose money in its core business, but its high cash balance could throw off $100 million in annual interest income, largely offsetting losses for the next year or so,” they wrote.
The return of Roaring Kitty
GameStop’s stock also spiked in May when Gill, a financial analyst turned influencer, posted an image on X suggesting he was returning to the public eye. Before his rise to popularity, GameStop had experienced declining sales amid an industrywide pivot from game cartridges to video game streaming and digital downloads.
In its latest jump, the company’s stock price rose 47% on Thursday to close at $47.55 when Gill’s Roaring Kitty YouTube channel scheduled a June 7 livestream, which would mark his first appearance on the platform in three years.
“It’s pretty good to be back, you know? You kind of forget what it feels like. It’s been so long,” Gill said in typically rambling comments during the noon stream, which had been viewed 1.2 million times in less than three hours. The channel has more than 931,000 subscribers.
“What can I say about GameStop? The funny thing is, I have a lot of the same feelings about everything. I’ve talked a lot about GameStop and how I feel about the situation and all that,” he said.
Explaining his rationale for backing the company, Gill alluded to GameStop’s efforts to shift its business model from selling games in brick-and-mortar stores to streaming.”
There was kind of a two-part thesis to it, and that second part of the thesis is a reinvention of the business model, or a transformation, whatever you want to call it,” he said.
“Over the last couple of years I see an overemphasis of that legacy business. It’s not that it doesn’t matter, of course, but they’re in the transformation stage here, and what could they transform into? There are a lot of question marks about that, and understandably so. But essentially it becomes, at this stage… a bet on the management.”
