One of the most widely followed stocks of 2021 reported fourth-quarter earnings Tuesday after market close.
GameStop Corp GME reported quarterly earnings of $1.34 per share, which missed the analyst consensus estimate by a penny. This is a 5.5% increase over earnings of $1.27 per share from the same period last year. The company reported quarterly sales of $2.12 billion, which missed the analyst consensus estimate of $2.21 billion. This is a 3.3% decrease over sales of $2.19 billion in the same period last year.
Analysts On Earnings: GameStop missed EBITDA estimates, which was a big negative for Bank of America analyst Curtis Nagle. The analyst, which rates the stock at Underperform with a price target of $10, said the company missed EBITDA estimates by 66%.
Loop Capital analyst Anthony Chukumba told CNBC GameStop shares continue to trade at high valuations that aren't justifiable.
"This is not a good quarter," Chukumba said. "I will be listening to how they're going to pull a rabbit out of the hat and turn this into a viable company."
Chukumba said GameStop needed "some magic beans and pixie dust" to help the company going forward. He dropped coverage of the stock in January.
Turnaround Plan: Hightower Advisors Portfolio Manager and CNBC contributor Stephanie Link highlighted the progress of GameStop’s e-commerce business.
In the fourth quarter, e-commerce was 34% of total revenue for GameStop compared to 12% in the prior year’s fourth quarter.
“They’re headed in the right direction,” Link said.
Telsey Advisory Group advisor Joseph Feldman, who has an Underperform rating on GameStop shares, said the strategic plan from the company 2021 “seems normal.” The analyst lowered the price target from $33 to $30.
“We continue to be very skeptical on GME’s efforts to address its long-standing issue of digital disintermediation and the fact that it’s core market in new and pre-owned physical console gaming is shrinking at a rapid pace,” Nagle said.
What’s Next: Link told CNBC turnarounds take time. Investors are betting on Ryan Cohen and the Chewy Inc CHWY model being successful if you’re investing in GameStop.
“With industry comps getting much tougher starting in March, we expect a continuation of very challenged results for GME,” Nagle said.
The Bank of America analyst also said the non-fundamental factors with GameStop are fading including conversations on Reddit, trading volume and short interest.
GameStop mentioned leveraging its digital assets like its PowerUp rewards program on the earnings call. Nagle said engagement in PowerUp has declined for years and questions this focus from the company.
Early first-quarter comparable sales are below Telsey and Street expectations, Feldman said. The analyst lowered estimates for fiscal 2021 as a result.
“This stock is not worth anything close to where it is trading,” Chukumba said. “This will end badly.”
GME Price Action: GameStop shares are down 20% to $145.40 at publication time.
Photo via BentleyMall on Wikipedia.
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