GameStop Corp. reported its seventh consecutive quarterly loss after the market closed on Wednesday and highlighted its aim of returning to profitability within the close to time period, however analysts warn there are many challenges forward.
“Throughout 2021 and 2022, we were extremely focused on repairing our decayed foundations,” mentioned GameStop
GME,
CEO Matt Furlong on a convention name late Wednesday. Furlong additionally described headcount reductions within the second half of 2022 and mentioned that GameStop is a stronger enterprise than at any time within the latest previous.
While shares rallied greater than 6% shortly after Thursday’s open, analysts weren’t satisfied that the corporate’s efforts to reshape itself have delivered outcomes.
“GameStop’s turnaround plan has proven fruitless so far, as reflected by the announcement of reductions to the company’s corporate headcount in the back half of this calendar year,” Wedbush analyst Michael Pachter wrote in a be aware launched on Thursday. “Short-term headwinds include poor results for its NFT [non-fungible token] marketplace, a contraction of the broader NFT space, ongoing hardware constraints, and cash burn.”
Now learn: GameStop reports worse-than-expected quarterly loss, revenue decline
GameStop entered the NFT market earlier this yr when it cast a partnership with Immutable X Pty Ltd. to create a fund of as much as $100 million in Immutable X’s IMX tokens.
See additionally: NFT sales volume at a record low after 20% drop in November
The videogame retailer additionally faces long-term headwinds that embody liquidity challenges and an industry-wide shift towards digital downloads, in line with Pachter.
Set towards this backdrop, he lowered his GameStop worth goal to $5.30 from $6. He has an underperform score on shares of GameStop.
Other analysts have additionally famous the difficulties dealing with the corporate. “Revenue and earnings shortfalls in [the third quarter] reflect, in our view, ongoing challenges to the GameStop retail model and limited progress on new initiatives, although we note limited console hardware supplies and fewer hit video game releases,” Baird analyst Colin Sebastian wrote in a be aware launched on Thursday. “Notably, there was no mention in the release (or on the conference call) regarding the company’s much-publicized NFT marketplace initiative, nor is the company sharing specific data on the e-commerce transition.”
Related: GameStop enters NFT marketplace with Immutable X partnership
Baird additionally expects to see extra retailer closures and headcount reductions from the corporate. “GameStop’s increasing focus on operating efficiency makes sense given secular headwinds and limited progress that we can tell on key strategic initiatives,” Sebastian wrote.
However, the corporate could profit from enhancing provides for all main consoles in the course of the vacation interval and into subsequent yr, in line with the analyst. On a seasonal foundation, it may be helped by a rise in new sport launches.
GameStop, like its fellow meme inventory AMC Entertainment Holdings Inc.
AMC,
was a significant beneficiary of the meme-stock shopping for frenzy in January 2021, which despatched the struggling firm’s shares skyrocketing to dizzying heights. Between January and March 2021, GameStop’s inventory worth rose more than 1,200% and the corporate’s market cap surpassed $17 billion.
GameStop’s inventory has fallen 40% this yr, outpacing the S&P 500’s
SPX,
decline of 17.5%. The firm’s market cap is now round $7.1 billion.
Also learn: GameStop stock soared, then fell all the way back down, in biggest price reversal since May. But why?
Independent equity-research agency New Constructs added GameStop to its listing of “zombie” shares in August and has highlighted the corporate’s money burn as a difficulty.
GameStop ended its most up-to-date quarter with $1.042 billion in money, money equivalents and marketable securities. GameStop’s long-term debt stays restricted to a low-interest, unsecured time period mortgage related to the French authorities’s response to COVID-19, the corporate mentioned.
Of three analysts surveyed by RealitySet, one has a maintain score and two have a promote score for GameStop.