Gaming retailer GameStop (NYSE: GME) has been extremely popular among retail investors since the start of 2021. In January last year, a group of retail traders on Reddit successfully orchestrated a short-squeeze on GME stock driving share prices to all-time highs.
In fact, GameStop stock rose from $19 at the end of 2020 to $325 by the end of January 2021. At the time of writing, GME stock is trading at $137.21. In the last three trading sessions, GameStop shares have rallied over 50% which suggests another short squeeze may be on the horizon.
GameStop is scheduled to report its earnings for fiscal Q1 of 2022 (ended in April) on Wednesday, June 1st at 5:00 pm Eastern Time.
To listen to the call and access the earnings transcript, as well as the shareholder's letter and the company's financial statements for the quarter, all you need to do is go to GameStop's investor relations page.
A company's earnings report is a key catalyst for its share price, at least in the near term. Let's see what investors should expect from GameStop in the quarter that ended in April.
Analysts tracking GameStop expect the company to report revenue of $1.32 billion with an adjusted loss per share of $1.45. In the year-ago period, GameStop reported revenue of $1.27 billion with a loss of $0.45 per share.
GameStop has missed analyst earnings estimates in three of the last four quarters which is likely to make investors nervous. Given its revenue forecasts, GameStop's top line is set to increase almost 4% year-over-year. However, this still represents a decline of 15% compared to its sales reported in fiscal Q1 of 2019, which was a pre-pandemic period.
In addition to its Q1 results, investors will be closely watching GameStop's guidance for the rest of fiscal 2022. Wall Street has forecast sales of $6.26 billion and an adjusted loss of $5.28 per share this fiscal year.
Despite its monstrous gains in the last 18 months, GameStop is fundamentally weak. Its market-thumping returns have largely been driven due to the company's status as a popular meme stock.
GameStop operates in the retail gaming vertical and sells gaming consoles, as well as copies of new and used games. In the past decade, the secular shift towards digital gaming has impacted the company's revenue and profit margins significantly.
GameStop sales have declined from $8.28 billion in fiscal 2018 to $6 billion in fiscal 2021. Comparatively, its gross margins have narrowed from 29% in 2017 to 22.4% in 2021.
GameStop reported an operating loss of $368.5 million in fiscal 2021, compared to a loss of $238 million in the year-ago period. It ended the last year with $1.27 billion in cash, providing the company with enough liquidity to support its cash burn rates.
Alternatively, GameStop continues to expand its suite of products and solutions. Earlier this month it launched a digital asset wallet that enables gamers to store, send, and receive cryptocurrencies as well as non-fungible tokens across decentralized applications. It is a self-custodial Ethereum wallet and the wallet extension can be downloaded from the Chrome Web Store. Further, GameStop also stated it will launch an NFT marketplace in Q2.
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