GameStop Slumps as Analysts React to 3rd-Quarter Loss

GameStop shares slumped on Wednesday as analysts reacted to the videogame retailer’s third-quarter loss and revenue drop.
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GameStop  (GME) - Get Report shares slumped on Wednesday as analysts reacted to the videogame retailer’s third-quarter loss and revenue drop.

The Grapevine, Texas, company reported an adjusted third-quarter loss of 53 cents a share as revenue fell 30% to $1 billion.

Analysts surveyed by FactSet expected the company to post a loss of 85 cents a share on revenue of $1.09 billion.

GameStop shares recently traded at $14.20, down 16%. They had well more than tripled year to date through Tuesday, as videogame usage has exploded during the coronavirus pandemic.

As for the analysts, Benchmark cut its price target to $5 from $6, affirming a sell rating. 

It called the company’s third-quarter performance a “dramatic downturn,” Bloomberg reports. The notion that GameStop can compete with Amazon is “comical,” Benchmark said.

The pandemic may be hurting in-store traffic, it noted. 

“The vast majority of players have scant desire to buy product from a GameStop retail or e-commerce location, and the hottest games are often free-to-play like Fortnite, while GameStop's e-commerce growth is more due to the virus than a compelling platform.”

GameStop’s planned $100 million share offering will dilute holders, Benchmark said.

Other analysts weren’t as harsh. “While the open market sales agreement is likely to weigh on shares, it is likely that the selling investment bank can manage the offering and keep dilution to 7 to 8 million shares,” Wedbush said, according to Bloomberg. It has a neutral rating and a $16 price target.

Baird also has a neutral rating, and it lifted its price target to $13 from $5. That increase stems from “the postpandemic scenario, the rightsizing of store base and expense structure, and management’s laudable pivot towards e-commerce,” Baird said, according to Bloomberg.