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GameStop’s third-quarter results on deck: What to expect from the meme-stock darling

MarketWatch logo MarketWatch 12/5/2022 James Rogers
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MEMEMONEY

Meme-stock darling GameStop Corp. reports its third-quarter results after the market closes on Wednesday, with analysts looking for a narrowing loss from the videogame retailer.

GameStop like its fellow meme stock AMC Entertainment Holdings Inc. was a major beneficiary of the meme-stock buying frenzy in January 2021, which sent the struggling company’s shares skyrocketing to dizzying heights. Between January and March 2021, GameStop’s stock price rose more than 1,200% and the company’s market cap surpassed $17 billion.

But GameStop’s stock has fallen 29.3% this year, outpacing the S&P 500’s decline of 15.5%, and the company’s market cap is now around $8.4 billion. AMC’s stock is down 52.3% in 2022.

Analysts surveyed by FactSet are looking for GameStop to report a net loss of $94 million, or 29 cents a share, compared with a net loss of $105 million, or $1.39 cents a share, in the prior year’s quarter. Analysts are looking for third-quarter revenue of $1.4 billion, compared with $1.3 billion in the same period last year.

Also read: GameStop stock soared, then fell all the way back down, in biggest price reversal since May. But why?

Of three analysts surveyed by FactSet, one has a hold rating and two have a sell rating for GameStop.

In September, GameStop’s stock surged after the company reported a narrower-than-expected loss and announced a partnership with cryptocurrency exchange FTX. Last month, FTX, which was once the world’s third-largest crypto exchange, filed for bankruptcy following a dramatic collapse that sent shockwaves through the crypto industry.

On Nov. 11, GameStop tweeted that it was winding down its relationship and pilot partnership to market gift cards with FTX and that it would provide refunds to affected customers.

GameStop’s second-quarter results marked the company’s sixth consecutive quarterly loss.

Now read: AMC stock spikes up in volatile trading, other meme stocks also rally

While the heady days of early 2021 are far in the rearview mirror, GameStop’s stock still reflects meme-stock trends. Earlier this year, GameStop enjoyed its longest winning streak in over a decade, boosted in part by a bullish post on the WallStreetBets subreddit.

GameStop also rallied alongside fellow meme stocks AMC, AMC Preferred Equity Units and Bed Bath & Beyond Inc. last week, bucking weakness in the broader stock market.

But critics have questioned GameStop’s fundamentals. Independent equity-research firm New Constructs added GameStop to its list of “zombie” stocks in August and has highlighted the company’s cash burn as an issue.

GameStop ended its most recent quarter with cash and equivalents of $908.9 million. The company also said it ended the quarter with no debt other than a low-interest loan related to the French government’s response to the pandemic.

Also read: Carl Icahn shorting GameStop, report says

Last month, Bloomberg reported that billionaire investor Carl Icahn is shorting GameStop. Citing people familiar with the matter, Bloomberg reported that Icahn began shorting GameStop in January 2021, around the height of the meme-stock frenzy, and still holds a large position.

Icahn has not yet responded to a request for comment from MarketWatch.

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