GameStop’s Q4 Results. Traders React to Weak Earnings

GameStop
Corp. is facing a whirlwind of challenges. The beloved stock among retail
traders took a hit early Wednesday morning, now down over 20% for the year and
nearly 50% in the last twelve months. This downturn follows the company’s Q4
earnings report and more job cuts. Let’s delve into the details.

Everyone’s favorite meme stock, GameStop (NYSE:GME), is
encountering significant selling pressure. The company disclosed its earnings
for the fourth quarter, revealing a 19% decline in revenue compared to the
previous year, resulting in a
15% drop in GME stock, now trading below $13 per share.

As shown
in the chart, just a day earlier, the company’s stock surged by 15%, marking
its best performance in several months. However, GameStop’s positive momentum
was short-lived.

GameStop
missed Wall Street’s expectations. During the fourth quarter, the company
reported revenue of $1.79 billion, falling below the expected $2.05 billion.
Earnings were also disappointing, with the darling of retail traders earning 22
cents per share, more than 26% below Wall Street’s forecast of 30 cents per
share.

Like
other retailers, GameStop hasn’t been immune to persistent inflation. The retailer witnessed a
decline in sales across its hardware and accessories categories, including
software and collectibles.

Hardware
and accessories sales, encompassing Playstations, Xbox, and Nintendo Switch
consoles, plummeted by 61% to $1.09 billion during the recent quarter.
Meanwhile, software sales, covering both new and pre-owned gaming software as
well as game downloads, dropped by 26% to $465 million. Even collectibles saw a
decline of 13% to $277 million.

Investors
are also closely monitoring the recent round of job cuts announced by the
company in a regulatory filing associated with this earnings release.

With a
current workforce of approximately 8,000 full-time employees and between 13,000
and 18,000 part-time employees, the company is undoubtedly burdened, and
various avenues are being explored to trim costs and manage cash flow. However,
additional layoffs are likely to lead to more store closures over time. The
company has transitioned from a state of abundant investment to one of
aggressive cost-cutting, which does not bode well for its growth prospects.

This article was written by FL Contributors at www.forexlive.com.