GameStop (GME) is ready to report first-quarter fiscal results after the market closes on Wednesday, which is likely to reflect improved sales and narrowing losses, although many investors are addressing the company’s “meme stock” effect on business results.
Here are the key results that Wall Street expects to see in GameStop’s report, based on consensus estimates compiled by Bloomberg:
GameStop, one of the original names pushed higher during a frenzy of retail investor activity earlier this year, has seen a renewed wave of interest online in recent weeks. Traders on platforms, including Reddit̵
According to data from S3 Partners, the short-term interest in GameStop amounted to $ 3.04 billion per game. Tuesday’s close with 10.86 million shares shorted to a 19% short percent of the float (the percentage of a company’s stock that has been shorted by institutional traders). Short sales in GameStop fell $ 294 million last week.
For many investors, the fundamentals of the company have taken the back seat in the mass of these stocks when making investment decisions. GameStop is expected to post its fourth loss in the last five quarters. Revenue is expected to grow by 15% to mark the first year-over-year increase in almost three years. These estimates were drawn from just three Wall Street firms as most analysts on the sales side dropped their coverage of GameStop shares in recent months given its increased volatility.
And of the analysts still covering GameStop, most have taken a bearish stance on the stock.
“We rate GameStop underperformance given our belief that more structural headwinds centered around digital disintermediation will continue to weigh on earnings and cash flow,” Bank of America’s Curtis Nagle wrote in a recent note. “GameStop currently has a significant cash position, which we expect to be used to repay debt and repurchase shares. However, the risk of free cash becoming negative over the next few years, earnings support from return on capital will eventually fade and likely to be overwhelmed by sustained declining operating earnings. ”
Last quarter, the company refused to provide guidance and reported adjusted earnings in the fourth quarter per. Stock, revenue and comparable sales, each of which lost estimates, although these measurements recovered from their worst points from during the pandemic.
However, some have argued that there is a fundamental argument for investing in stocks in companies like AMC and GameStop, where consumer-facing brick-and-mortar companies benefit from the same “reopening” rotation that has lifted the airline, cruise ships, leisure stocks and retailers.
And both GameStop and AMC have tried to leverage their large private investor base. Companies have issued millions of new shares over the past many months – with prominent disclaimers about potential volatility and losses for investors – as a means of raising additional funds for reinvestment in companies. AMC recently took this strategy a step further and launched a new shareholder platform to engage directly with investors and offer them personal perks like free popcorn at the company’s theaters.
“AMC is to me probably the most interesting of these [speculative trades] in how people are looking at it right now, “JJ Kinahan, TD Ameritrade chief marketing strategist, told Yahoo Finance. While GameStop … I think is more of the pure ‘meme stock’ and we’re trying to figure out what the basics are. And I think their earnings coming out on Wednesday will be a really interesting story. “
Valuation has been a major concern for analysts covering GameStop, and a number have fully drawn coverage of the stock amid unprecedented retail investor interest. Of those still covering the stock, two rated the stock as a team, while two rated the stock as a Sell.
GameStop shares have accumulated more than 1,400% this year to date, including an 86% increase over the last month alone.
This post will be updated with the results of GameStop’s quarterly results on Wednesday after market closing. Come back for updates.
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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