After the market closed on June 9, GameStop Corp. (GME, Financial) reported earnings results for its first quarter of fiscal 2021, which ended on May 1.
The video game retailer handily beat both earnings and revenue estimates on strong sales growth, particularly in e-commerce.
Shares prices dropped 6% in after-hours trading following the news after closing the trading day at $302.56 for a 0.86% gain.
Earnings overview
GameStop reported revenue of $1.28 billion, up 25% year over year, while the adjusted loss per share came in at 45 cents compared to $2.44 in the prior-year quarter. Analysts had been expecting revenue of $1.16 billion and an adjusted loss per share of 83 cents.
The gross margin declined 180 basis points to 25.9%. The operating loss was $40.8 million compared to $108.0 million in the fiscal 2020 first quarter, while selling, general and administrative expenses were $370.3 million, which was $16.2 million less compared to the prior-year quarter.
As of the quarter’s end, the company had $770.8 million in cash and restricted cash. It also reported that it had no borrowings under its asset-based revolving credit facility and no long-term debt. Short-term debt stood at $48.1 million compared to $417.2 million a year ago.
Looking forward
Along with its earnings results, GameStop announced it is appointing Matt Furlong as CEO and Mike Recupero as chief financial officer. Both Furlong and Recupero join from Amazon (AMZN, Financial), having held senior roles with the e-commerce giant. This announcement comes on the heels of nabbing Chewy (CHWY, Financial) co-founder Ryan Cohen to become GameStop’s chairman.
The company said it “is continuing to actively pursue senior talent with gaming, retail and technology experience” as part of its turnaround strategy.
GameStop continued to suspend guidance figures, but it did note that total sales increased 27% in May, reflecting strong momentum.
Valuation
GameStop was the first of the so-called “meme stocks,” which are stocks with high short interest that are targeted for purchase by large numbers of retail investors with the goal of triggering a short squeeze. After trading below the $20 threshold since late 2017, GameStop’s share price shot up to over $300 in mere days due to meme stock trading.
Thus, investors will likely want to steer clear of this volatile stock unless they are looking to gamble on gaining or losing a large amount of money in a short period of time. The stock price is currently entirely dependent on its value as a meme stock, which will gain and lose steam in unpredictable patterns.
