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GameStop (GME) Down 10.7% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for GameStop (GME - Free Report) . Shares have lost about 10.7% 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 the most recent earnings report in order to get a better handle on the important drivers.

GameStop Q4 Earnings and Revenues Surpass Estimates

GameStop posted better-than-expected fourth-quarter fiscal 2022 results wherein both top line and bottom line beat the Zacks Consensus Estimate. GME reported the first quarterly profit after seven straight quarters of losses.

Q4 in Details

GameStop posted adjusted earnings of 16 cents per share in fourth-quarter fiscal 2022, beating the Zacks Consensus Estimate of a loss of 16 cents. The company had incurred adjusted loss per share of 47 cents in the prior-year quarter.

The company reported net sales of $2,226.4 million, which surpassed the Zacks Consensus Estimate of $2,168 million. However, the metric declined from $2,253.9 million reported in the year-ago fiscal quarter. Management highlighted that assessing partnerships with gaming and retail companies attributed to cost-effective top-line growth.

Margins

Gross profit increased to $499.8 million from $378.2 million posted in the year-ago fiscal quarter. Selling, general and administrative (SG&A) expenses declined to $453.4 million from $538.9 million reported in the year-ago quarter. As a percentage of SG&A expenses came in at 20.4%, down from 23.9% reported in the year-ago period.

The company’s operating earnings was $46.2 million in the reported quarter. It had reported an adjusted operating loss of $166.8 million in the prior-year fiscal period.

Other Financial Aspects

GameStop ended the quarter with cash and cash equivalents of $1,391 million, long-term debt of $28.7 million and stockholders’ equity of $1,322.3 million. Inventory was $682.9 million at the end of the reported quarter compared with $915 million at the close of the same quarter last year. This reflects the company’s ongoing focus on maintaining a healthy inventory position.

During the fourth quarter, the company provided cash flow from operations of $337.2 million compared with an outflow of $110.3 million during the same period last year. Free cash flow at the end of the reported quarter came in at $326.6 million. Capital expenditures in the quarter amounted to $11.6 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

The consensus estimate has shifted -13.33% due to these changes.

VGM Scores

At this time, GameStop has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, 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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