Proactive Investors - GameStop Corp (NYSE:GME) is expected to report second quarter financial results in line with expectations, with the video game retailer seen posting a “modest” sequential improvement in profit, analysts at Wedbush believe.
This increase in profit is expected to stem from increased interest income following two share offerings for a total of 120 million shares that netted the company $3 billion or $7 per share.
After the stock market closes on Tuesday, September 10, 2024, Wall Street expects GameStop to report sales of $896 million and a loss per share of $0.09, compared to $882 million and a loss per share of $0.12 in the first quarter.
“GameStop’s bottom line should benefit from the mix shift towards software, as well as a significantly higher interest income driven by recent share offerings,” analysts wrote. “With that said, we continue to expect operating profit to be negative.”
Wedbush does not expect management to provide detailed financial guidance for the full year.
“Management continues to shun investor interaction, forgoing the customary conference call and Q&A session that typically accompanies earnings releases,” they wrote.
“The company has not provided formal sales or earnings guidance since 2019, and does not help investors understand the pace of store closures or the performance of new revenue categories.”
Further, analysts believe GameStop continues to face a “near insurmountable barrier” in its bid to return to growth.
Challenges include the ongoing shift of game sales from physical to digital, a decline in game sales as microtransactions proliferate, the growth of subscription services, and a decline in hardware sales as streaming services become more popular.
Analysts also noted that the company has a “total lack of any strategy” for entering new categories with growth potential.
“GameStop shares trade at a level that ignores the company’s many challenges ahead,” they wrote.
As such, they repeated their ‘Underperform’ rating and awarded the stock a price target of $11, reflecting $9.50 per share in net cash plus a going concern value of $1.50 per share.
Shares of GameStop traded hands at about $22 on Friday.