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Why Is GameStop (GME) Down 34.6% Since Last Earnings Report?
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It has been about a month since the last earnings report for GameStop (GME - Free Report) . Shares have lost about 34.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is GameStop due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
GameStop Reports Wider-Than-Expected Q3 Loss
GameStop posted a wider-than-expected third-quarter fiscal 2022 loss. However, the bottom line compared favorably with the year-ago fiscal quarter’s reported loss. The retailer’s fiscal third-quarter top line declined year over year and missed the Zacks Consensus Estimate.
Q3 in Details
GameStop posted an adjusted loss of 31 cents per share in third-quarter fiscal 2022, narrower than the Zacks Consensus Estimate of a loss of 29 cents. In the year-ago fiscal quarter, the company had reported an adjusted loss of 35 cents a share.
The company reported net sales of $1,186 million, which missed the Zacks Consensus Estimate of $1,382 million. The metric declined from $1,296.6 million reported in the year-ago fiscal quarter. Management highlighted thatsales attributable to new and expanded brand relationships remained solid in the quarter.
By sales mix, hardware and accessories sales declined to $627 million from $669.9 million reported in the year-ago fiscal quarter. Software sales came in at $352.1 million, down from $434.5 million posted in the prior-year fiscal quarter. Sales in the collectibles unit amounted to $207.3 million compared with $192.2 million reported in the year-ago fiscal quarter.
Margins
Gross profit declined to $291.6 million from $318.6 million posted in the year-ago fiscal quarter, while the gross margin remained flat year over year at 24.6%.
Adjusted SG&A expenses stood at $386.6 million, down from $421.5 million reported in the year-ago quarter.
The company’s adjusted operating loss was $95 million in the reported quarter. It had reported an adjusted operating loss of $102.9 million in the prior-year fiscal period. Adjusted EBIDTA loss was $66.6 million compared with the adjusted EBIDTA loss of $79.8 million in the prior-year fiscal quarter.
Other Financial Aspects
The company ended the quarter with cash and cash equivalents of $803.8 million, net long-term debt of $28.8 million and stockholders’ equity of $1,245 million. Inventory was $1,131.3 million at the end of the reported quarter compared with $1,140.9 million at the close of the same quarter last year. The company maintains enough in-stock levels to meet customer demand and mitigate supply-chain challenges.
During the third quarter, the company provided cash flow from operations of $177.3 million, compared with an outflow of $293.7 million during the same period last year. Free cash flow at the end of the reported quarter came in at $164.3 million. Capital expenditures in the quarter amounted to $13 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
The consensus estimate has shifted 45.61% due to these changes.
VGM Scores
Currently, GameStop has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise GameStop has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Why Is GameStop (GME) Down 34.6% Since Last Earnings Report?
It has been about a month since the last earnings report for GameStop (GME - Free Report) . Shares have lost about 34.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is GameStop due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
GameStop Reports Wider-Than-Expected Q3 Loss
GameStop posted a wider-than-expected third-quarter fiscal 2022 loss. However, the bottom line compared favorably with the year-ago fiscal quarter’s reported loss. The retailer’s fiscal third-quarter top line declined year over year and missed the Zacks Consensus Estimate.
Q3 in Details
GameStop posted an adjusted loss of 31 cents per share in third-quarter fiscal 2022, narrower than the Zacks Consensus Estimate of a loss of 29 cents. In the year-ago fiscal quarter, the company had reported an adjusted loss of 35 cents a share.
The company reported net sales of $1,186 million, which missed the Zacks Consensus Estimate of $1,382 million. The metric declined from $1,296.6 million reported in the year-ago fiscal quarter. Management highlighted thatsales attributable to new and expanded brand relationships remained solid in the quarter.
By sales mix, hardware and accessories sales declined to $627 million from $669.9 million reported in the year-ago fiscal quarter. Software sales came in at $352.1 million, down from $434.5 million posted in the prior-year fiscal quarter. Sales in the collectibles unit amounted to $207.3 million compared with $192.2 million reported in the year-ago fiscal quarter.
Margins
Gross profit declined to $291.6 million from $318.6 million posted in the year-ago fiscal quarter, while the gross margin remained flat year over year at 24.6%.
Adjusted SG&A expenses stood at $386.6 million, down from $421.5 million reported in the year-ago quarter.
The company’s adjusted operating loss was $95 million in the reported quarter. It had reported an adjusted operating loss of $102.9 million in the prior-year fiscal period. Adjusted EBIDTA loss was $66.6 million compared with the adjusted EBIDTA loss of $79.8 million in the prior-year fiscal quarter.
Other Financial Aspects
The company ended the quarter with cash and cash equivalents of $803.8 million, net long-term debt of $28.8 million and stockholders’ equity of $1,245 million. Inventory was $1,131.3 million at the end of the reported quarter compared with $1,140.9 million at the close of the same quarter last year. The company maintains enough in-stock levels to meet customer demand and mitigate supply-chain challenges.
During the third quarter, the company provided cash flow from operations of $177.3 million, compared with an outflow of $293.7 million during the same period last year. Free cash flow at the end of the reported quarter came in at $164.3 million. Capital expenditures in the quarter amounted to $13 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
The consensus estimate has shifted 45.61% due to these changes.
VGM Scores
Currently, GameStop has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise GameStop has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.