Video game retailer GameStop Corporation is optimistic about the supply of next generation gaming consoles at its stores amidst a supply chain crunch that has led to a console shortage and caused drastic price increases. The sentiment came as the company’s chief executive officer Mr. Matt Furlong shared his thoughts about GameStop’s recent quarter and what he expects in the current quarter and in the future. GameStop released its earnings report for its second fiscal quarter at the close of the market yesterday revealing that it brought in $1.8 billion in revenue and posted yet another net loss – this time totaling $108.7 million. The top and bottom line results were both disappointing, as the revenue dropped while the net loss increased annually over GameStop’s second quarter of 2021.
GameStop Shares Bounce And Rise By 7% As It Beats Analyst Net Loss Estimates
Despite the rather bleak look of the earnings report, the silver lining present in yesterday’s result was the fact that analysts polled by FactSet had estimated the company to post a net loss per share of 42 cents. However, GameStop posted a 35 cent loss, which while not rosy, was enough to generate a fresh surge of optimism in the company’s fortunes.
A company simply missing net loss estimates is not sufficient on its own to send its shares surging on the stock market, but GameStop’s case is unique as it is one of the earliest meme stocks that managed to captivate retail investor interest last year. This came as the short interest in the company was at a record high, which indicated that hedge fund investors were betting on the shares to drop in the stock market owing to weak fundamental performance.
However, they were dealt devastating losses as retail investors acted in unison and drove GameStop’s share price to new highs. Since then, the company has undergone significant management shakeups under the guidance of an activist investor but it is yet to reverse the trend of quarterly net losses which began in 2019.
GameStop’s latest revenue for its second quarter of 2022. Image: GameStop
Following its earnings report for the second quarter of 2022, GameStop’s management was part of a brief earnings conference that lasted less than ten minutes. At the event, the company’s chief executive officer did not take any analyst questions and instead chose to comment on shareholder “enthusiasm”, recent strategic initiatives, costs and the gaming console shortage.
For the shortage, Mr. Furlong remained optimistic that it would resolve soon, and as part of his prepared remarks, commented that:
In terms of an outlook, we’re not providing formal guidance at this time. It is worth noting, however, that our ongoing engagement with key suppliers is positioning us to receive stronger supply of next-generation consoles in the months ahead. I want to finish by reinforcing that we’re working to accomplish something unprecedented in our industry, transform a legacy brick-and-mortar retailer into a technology-led organization that meets customers’ needs through stores, e-commerce properties in both digital marketplaces and new online communities. Our path to becoming a more diversified and tech-centric business is one that obviously carries risk and will take time.
Analysts, for their part, have remained skeptical about GameStop’s attempts to develop a non-fungible token (NFT) marketplace. A deeper look into the financial results revealed that GameStop continued to bleed cash during the quarter, with its free cash flows dropping to a negative $124 million. This raises questions of if, or when, the company will have to raise more cash to fund its operations and initiatives, as its quarterly statements refuse to allow management any breathing room.
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