GameStop Highlights Trading Cards As Next Growth Segment At Annual Meeting, Not Bitcoin

Video game retailer GameStop Corporation GME recognizes its gaming business is under pressure and is turning to Bitcoin BTC/USD and trading cards as its next growth segments.

What Happened: At the company’s annual meeting, GameStop CEO Ryan Cohen highlighted how the first quarter was the company's first profitable Q1 since 2019. Cohen said this came from reducing costs, closing unprofitable stores and "focusing on the core fundamentals of the business," as reported by IGN.

One item quickly becoming a core fundamental is trading cards.

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"We are focusing on trading cards as a natural extension of our existing business," Cohen said. "The trading card market – whether it's sports, Pokémon, or collectibles, is aligned with our heritage – it first our trading model, it appeals to our core customer base, and it's deeply embedded in physical retail."

Cohen said trading cards have "high margin potential" and are a "logical expansion."

GameStop recently purchased 4,710 Bitcoin as part of a new treasury reserve strategy, signaling its commitment to holding the cryptocurrency—an area where investors expect further activity.

Shares declined on news of a planned $1.75 billion private senior note offering, overshadowing a mixed first-quarter report. Revenue came in at $732.4 million, missing the $754.2 million Street estimate. While hardware and software sales declined year-over-year, collectibles revenue rose to $211.5 million.

Despite the revenue miss, GameStop posted a surprise profit. Earnings per share of 17 cents beat expectations of four cents. Operating income hit $27.5 million—up from a $55 million loss a year ago—while adjusted net income surged to $83.1 million, compared to a loss of $36.7 million in the prior year's first quarter.

Why It's Important: GameStop's focus on collectibles has some investors believing the company could be a takeover target.

However, on Friday, trading card grading company PSA told Cllct Media that it had no plans to acquire GameStop.

For those who forgot, Collectors CEO Nat Turner joined GameStop's board of directors back in November. Collectors is the owner of PSA and previously signed a collaboration with GameStop to be an authorized PSA dealer.

PSA denied a potential acquisition. However, the company’s growth in trading cards could create value for GameStop and bring in a slight buyout multiple for potential companies in the trading card and collectibles space that could capitalize on the company’s retail footprint.

Trading cards are also the lone segment that Wedbush analyst Michael Pachter sees as a positive for the company.

"GameStop's foray into the trading card business appears to be the only recent business venture to see modest success," Pachter said in a recent investor note.

The analyst maintained an Underperform rating on GameStop with a $13.50 price target.

Price Action: GameStop closed at $22.14 for the week compared to a 52-week trading range of $18.73 to $35.81. The stock was down 26% during the week.

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