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Fiscal Q3 Earnings Live Blog: Will GameStop Stock Rebound?

It is time! GameStop is scheduled to deliver fiscal Q3 earnings on Wednesday, December 9, after the closing bell. Follow Wall Street Memes as we live blog the results and earnings call.

Gaming retailer and meme crowd favorite GameStop  (GME) - Get GameStop Corp. Class A Report will release its Q3 results on December 9, shortly after the closing bell. Wall Street Memes will start following all the action at 4 p.m. EST.

Please join us for this event, and refresh your browser regularly after the end of the trading session for real-time updates. Scroll through the different sections below to follow earnings day step-by-step. From top to bottom: (1) Q&A; (2) earnings call's prepared remarks; (3) earnings live blog, and (4) earnings expectations.

Figure 1: A GameStop store.

Figure 1: A GameStop store.

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Earnings call: Q&A

(There was no Q&A this quarter. Please scroll down.)

Earnings call: prepared remarks

5:15 p.m. EST: Well, this is all I have for you. Thanks for being with us for GameStop's earnings day. Have a great evening!

5:14 p.m. EST: CEO Furlong hit on a couple of the buzzwords that can, sometimes, get investors excited: NFT and blockchain are two of them. This is new vs. last quarter's call. But not enough specifics were provided.

5:12 p.m. EST: Not much for me to work with here... I would say that, as expected, the earnings call was more of a "check the box" moment. Not much more added to what we knew when the press release came out, an hour ago. 

5:11 p.m. EST: And just like that, the call is over!

5:10 p.m. EST: No guidance provided, as expected. CEO mentions that the top line (i.e. revenue growth) is what matters most of this point, and GameStop is focused on it.

5:09 p.m. EST: Cash flow discussion, inventory is a big piece of the outflow. We also discussed this below.

5:09 p.m. EST: Capex expected to continue to increase as investments keep being made.

5:08 p.m. EST: Now, balance sheet review. We addressed most of the key topics in our pre-call discussion. 

5:07 p.m. EST: CEO is now reviewing P&L results. Stock is still down -6% in after hours.

5:07 p.m. EST: New $500 million facility secured to protect liquidity.

5:06 p.m. EST: Improving shipping time by using the newly-launched Nevada warehouse.

5:05 p.m. EST: Brand partnerships mentioned again as revenue support in fiscal Q3. Expansion in PC gaming merchandise across several stores. Hiring underway.

5:04 p.m. EST: CEO thanks employees for their consumer-centric work. Selection, speed and satisfaction has been the focus. Investments into the future mentioned. Opportunities in NFT, blockchain.

5:03 p.m. EST: Here are the disclaimers. CEO Matt Furlong should be next.

5:02 p.m. EST: Expect some disclaimers first, followed by prepared remarks and... Q&A? GameStop has not opened the floor for questions in a few quarters now.

5:01 p.m. EST: The stock is down -5.5% in after hours, and the earnings call is about to begin.

5:00 p.m. EST: And we are back!

Earnings live blog

4:45 p.m. EST: We will take a 15-minute break now. Join us at 5 p.m. EST for the earnings call —link here.

4:43 p.m. EST: Lastly, I think that it hurts the thesis that the management team has not been more open about the path forward. Those looking to invest in GME from a business fundamentals perspective may have too little to base their decisions on. Let's see if the earnings call helps to provide more clarity.

4:41 p.m. EST: Cash flow looked ugly, but one must give GameStop a bit of credit for wanting to prepare well for the holiday season amid supply chain disruptions. I am not concerned about the balance sheet now, but would rather see the company make progress on cash flow soon.

4:40 p.m. EST: The rest of the P&L looked ok, particularly on the SG&A line. But I would be curious to hear more on the gross margin dynamics, and why it dropped as much as it did YOY.

4:38 p.m. EST: So, let me provide a summary of my first impressions. GameStop did quite well on revenues — although I wonder if the brand relationships may have been too much of a factor here, suggesting little contribution from "core, organic activities". 

4:37 p.m. EST: Quick price check, GME stock is still trading down about -5% in after hours, for a total of worse than -7% for the entire day. Investors and traders are not all that excited, it seems.

4:36 p.m. EST: GameStop's decent liquidity can be credited to almost $1.7 billion worth of shares issued earlier in 2021. This is where "meme mania" having driven the stock price so much higher directly helped the Grapevine, Texas-based company.

4:33 p.m. EST: One last item worth noting, cash and equivalents of $1.4 billion is way better than $445 million this time last year. This piece is important, because GameStop still produces substantial cash outflow from operations: nearly $300 million this quarter alone.

4:30 p.m. EST: The earnings report is very light on commentary in general, especially about future initiatives (e.g., e-commerce, partnerships, etc.). No mention of guidance or generic outlook either, as expected.

4:28 p.m. EST: Software sales actually dropped this time by -2%, after having climbed only 3% last quarter. Collectibles, the smallest of segments at less than 15% of total revenues, saw sales increase by a healthy 31%. 

4:27 p.m. EST: Very nice spike in hardware and accessories sales, the largest of GameStop's segments: 62% YOY. The "new and expanded brand relationships" mentioned below could have something to do with this.

4:24 p.m. EST: One item that could explain the very large EPS miss is tax. GameStop incurred tax expenses this time, despite losses from continuing operations of nearly $104 million. In fiscal Q3 of last year, the company had booked a large tax benefit. Taxe accounting can be tricky and hard to anticipate. 

4:22 p.m. EST: SG&A was 32.5% of revenues vs. 35.9% last quarter. This sharp reduction is good news, and probably driven by (1) operating leverage, since revenue jumped 30% and (2) store closures.

4:20 p.m. EST: If I can remember well my college accounting classes of 20 years ago, inventory factors may have impacted COGS, which could help to explain why gross margin of 24.6% this year dipped by nearly 3 percentage points YOY.

4:18 p.m. EST: GameStop really ramped up inventory, by nearly $300 million YOY to $1.14 billion. The reason: "the Company’s focus on front-loading investments in inventory to meet increased customer demand and mitigate supply chain issues."

4:16 p.m. EST: Back to the earnings report, here's a quote from it regarding the top line: "sales attributable to new and expanded brand relationships, such as Samsung, LG, Razer, Vizio and others, contributed to the Company's growth in the quarter".

4:13 p.m. EST: Commentary from CNBC's Mike Santoli: "Let's stop pretending that we are waiting for something more tangible in the earnings call". This is in reference to meme mania having little to do with matters like P&L, valuation multiples, etc. 

4:11 p.m. EST: CNBC's Josh Brown says "I have no fundamental view here. But don't get overly bearish, as the stock has held support since March."

4:10 p.m. EST: Revenue is $1.3 billion, 30% higher YOY, much better than expected. The earnings miss might be related to inventory moves. Let's dive in!

4:09 p.m. EST: It's a revenue beat and a large EPS miss!

4:08 p.m. EST: Ok, GME on the move in after-hours trading! The reaction is bearish so far: -5%!

4:07 p.m. EST: Back to GME, the stock is now down 50% from the late January 2021 high, and down 32% since late November alone. Will shares finally rebound?

4:05 p.m. EST: Alongside GameStop, other important companies are reporting earnings today. RH is the other retailer, while Campbell Soup is a well-known name on the list.

4:02 p.m. EST: Good day for the stock market... Of the major averages, the Dow was up +0.1%, and the Russell 2000 of small-cap stocks was up +0.8%.

4:00 p.m. EST: And the closing bell has rung! GameStop's earnings report is just around the corner!

3:59 p.m. EST: Wall Street expects to see revenue of $1.19 billion for 18% growth, and net loss per share of $0.52.

3:59 p.m. EST: Here is what to expect today: the earnings report will likely be released around 4:08 p.m. EST, roughly 10 minutes from now. The earnings call, which in the case of GameStop has lasted only a few minutes lately, starts at 5 p.m. EST.

3:57 p.m. EST: GME stock has not done all that well during the trading session: -2.1% at this moment, while the S&P 500 is moving a bit higher.

3:54 p.m. EST: Hello, everyone! It is almost time for GameStop to release its fiscal Q3 earnings report!

Earnings expectations

According to Seeking Alpha, Wall Street expects to see GameStop post revenue growth of 18% this time, on total sales of $1.19 billion. Interestingly, this is the last quarter of projected increase in the top line for the next year and a half, as GameStop’s comps begin to look tough in 2022.

Looking further down the P&L, per-share net loss is expected to land at -$0.52. If confirmed, this will be GameStop’s sixth quarter of negative earnings in the past seven — i.e. since around the start of the pandemic. Wall Street expects to see negative earnings in four of the next five quarters, fiscal Q3 included.

Here are some interesting questions to keep in mind on earnings day:

  • Will the console refresh cycle keep fueling strong double-digit growth in hardware? Or will the supply chain crisis cause sales to hiccup this time?
  • After growing by only 3% last quarter, will the software segment rebound?
  • Can momentum in collectibles continue? If so, will it be meaningful enough to instill investors with confidence and bullishness?
  • Will the management team provide more updates on GameStop’s logistics investments, and will it excite investors about the company’s inroads in e-commerce?
  • Will gross margin improve again, as it did in fiscal Q2? And can GameStop continue to keep SG&A under control, maybe through more store closures, creating operating leverage and helping with the bottom line?
  • Will the management team finally share guidance for the rest of fiscal 2021 or 2022?

Of course, a big question in the minds of investors and traders is whether GME stock can rebound from the current drawdown. Since peaking in late January 2021, shares have lost half of their market value.

The slightly better news is that GameStop stock comes into fiscal Q3 earnings week valued at 120 times the projected 2023 EPS. While this multiple still looks very rich, it is lower than the 140 times of three months ago. GME has been down nearly 20% in the past month alone.

Could earnings day be a catalyst that sends the share price higher? The “ape community” of retail investors certainly hope so.

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(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)