The day has finally arrived. On September 8, after the closing bell, GameStop will announce the results of its second quarter 2021.
Wall Street Memes will cover the event in real time, via live blog, starting at 4 p.m. EST. As usual, we will keep an eye on what matters most to GameStop stock (GME) - Get GameStop Corp. Class A Report traders and investors.
Below is a quick earnings preview – feel free to dive deeper by reading our Tuesday article. If you would like to go straight into the Wednesday after-hours action, skip to the “Live Blog Starts Here” section. Refresh the page regularly for the most recent take.
GameStop’s Q2 preview
The second quarter of the year will serve as a landmark for GameStop in a couple of ways. First, the company should continue to post substantially better results compared to a pandemic-stricken 2020, as a turnaround in the retailer’s fortunes continues to take shape.
Second, this will be the debut earnings season for CEO Matt Furlong. Will the executive introduce something new to support GameStop’s turnaround story and fuel investor sentiment? Will the new management team issue guidance for the remainder of the year?
Otherwise, measure the company’s key financial metrics against the following benchmarks:
- Wall Street projects $1.12 billion in revenues, for 19% YOY growth.
- Analysts also see adjusted net loss per share landing at $0.67, better than 2020’s $1.40.
- GameStop exited Q1 with $771 million in cash and not much in debt on the balance sheet.
Lastly, see below the trajectory of GameStock stock price over the past 12 months. Clearly, shares have been on a wild roller coaster ride that has been overwhelmingly bullish: returns of nearly 2,500% since this time last year and eye-popping annualized volatility of 278%.
Live Blog Starts Here
6:00 a.m. EST: At this moment, we are waiting for the end of the trading session to begin our live coverage. Stay tuned!
3:56 p.m. EST: Hello, everyone! It is about time for us to take a look at GameStop's Q2 results! Refresh your page for minute-by-minute updates.
3:58 p.m. EST: In the past, the earnings report has been released either right after 4 p.m. or around 4:25 p.m. Keep this in mind.
3:59 p.m. EST: The earnings call starts at 5:00 p.m. EST, and you can listen to it here.
3:59 p.m. EST: GME stock has just turned negative for the day, but barely so... -0.3%.
4:00 p.m. EST: And we are done with trading! The bell has rung!
4:02 p.m. EST: The report should cross any moment now. As a recap, here are some expected numbers to keep in mind for Q2:
4:03 p.m. EST: Estimated revenues of $1.12 billion for 19% YOY growth. Adjusted net loss per share of $0.67, much better than last year’s $1.40 loss in Q2.
4:05 p.m. EST: Below is how GME stock traded today. Nothing to be too excited about. Could shares finally move in after hours?
4:07 p.m. EST: Whether it matters much for so-called "meme stocks" is a whole separate discussion, but GME's valuation remains elevated. Forward P/E is 140 times based on 2023 projected earnings.
4:08 p.m. EST: Ok, the numbers are in!! We are looking at a revenue beat, and an EPS miss. Stock is down modestly as a result: -1.3%.
4:10 p.m. EST: The revenue beat is solid, as sales grew 25% YOY. The EPS miss is also noticeable, at 9 cents. But also, gross margin of 27.1% topped consensus by 50 basis points.
4:11 p.m. EST: Massive quantities of cash on the balance sheet, $1.8 billion vs. just less of $800 million last quarter. Debt remains minimal.
4:13 p.m. EST: GameStop also announced "lease of a new 530,000 square foot fulfillment center in Reno, Nevada, positioning the Company’s fulfillment network to span both coasts of the continental U.S."
4:14 p.m. EST: This shouldn't have caught anyone by surprise, but it speaks to the retailer's e-commerce ambitions.
4:16 p.m. EST: Let's take a closer look at the financial statements now...
4:16 p.m. EST: (By the way, GME inched higher for a second, but now trades down -3% in after-hours action, according to Yahoo Finance)
4:19 p.m. EST: The segment breakdown was not much of a surprise. Collectibles continued to grow the fastest, by 56%. However, this is GameStop's smallest business, and the growth pace has actually decelerated from last quarter.
4:20 p.m. EST: Hardware, representing north of half of the retailer's total revenues, grew 38%. This is in line with Q1. The console refresh cycle continues to power GameStop's results. Software climbed only a meager 3%, although I would think that comps were probably tougher here.
4:24 p.m. EST: Something else that I am interested in here... adjusted SG&A climbed only 11% YOY, suggesting operating leverage on revenues that grew 25%. Add this to gross margin that landed north of consensus, and GameStop's P&L is not looking too bad vs. expectations, in my view.
4:27 p.m. EST: Other key items... share count increased to nearly 73 million vs. 65 million in Q2 of last year. This is in part a reflection of $1.1 billion cash that GameStop raised through stock issuance in Q2 of this year.
4:30 p.m. EST: This is where opinions might diverge, but I think that raising cash is smart at a share price of nearly $200. Considering cash from ops was actually negative in Q2, at nearly $12 million, it does not hurt to beef up the balance sheet ahead of what investors and the management team expect to be a turnaround 2021-2022.
4:32 p.m. EST: Worth noting... no mention of guidance once again. While something could be shared during the 5 p.m. earnings call, even if only directionally, this may explain why GME stock is displaying weakness in after-hours trading, despite what I consider to be decent (not outstanding) results. Shares down -2.2% now.
4:33 p.m. EST: The above would be the key highlights so far, in my opinion.
4:35 p.m. EST: I will take a quick break ahead of the earnings call. Stick around for more on GameStop from the (new) management team, coming up next!
4:57 p.m. EST: And we are back for the earnings call!
4:58 p.m. EST: Once again, you can listen to it here.
4:59 p.m. EST: Question... will GameStop open the floor for Q&A this time? It did not last quarter, or the prior period.
Earnings call starts
5:01 p.m. EST: The call has started. Disclaimers first. Shares down -2.2% now.
5:02 p.m. EST: CEO Matt Furlough has the floor.
5:03 p.m. EST: CEO talks about delighting customer and delivering value to shareholders. Positioning GameStop to scale, including by hiring people with experience in e-commerce, UI, UX and supply chain. New Reno fulfillment facility mentioned, expected to go live next year.
5:04 p.m. EST: Balance sheet strengthened.
5:04 p.m. EST: CEO is now going through the P&L. Revenues up, despite 9% reduction in store fleet.
5:05 p.m. EST: SG&A discussed. Store reopening responsible for op leverage.
5:06 p.m. EST: Now, balance sheet. Cash higher by $1 billion vs. Q2 of last year. Issuance of 5 million shares used to raise capital. This was expected.
5:07 p.m. EST: Capex $13.5 million, consistent with Q1. Number should increase as company works on driving growth.
5:08 p.m. EST: No formal guidance offered! No commentary either...
5:09 p.m. EST: And the call ends! That was quick! I guess further commentary and Q&A would have been a nice-to-have, but not an expectation.
5:10 p.m. EST: Clearly, lack of more color on results and outlook did not please investors. GME stock sank another 1.5 percentage points as soon as the call ended.
5:10 p.m. EST: And dropping! GME is now down 7% in after hours.
5:11 p.m. EST: Ok, so my summary would be... decent Q2 results. I doubt that investors were reasonably expecting much more from GameStop's financial statements. But lack of outlook, a "vision", under new management seems to have pushed shares lower.
5:12 p.m. EST: Stock's after-hour losses have moderated to -5%, but clearly volatility remains in place. I'm curious to see how shares will behave tomorrow, once the opening bell rings!
5:13 p.m. EST: That's all on my end! Thanks for joining Wall Street Memes for our live blog coverage! See you soon!
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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)