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GameStop: Second Quarter 2021 Earnings Preview

On September 8, GameStop will release its fiscal second quarter results. Wall Street Memes will cover the event in real time, via live blog. Here's a preview.

The time has come for GameStop to release its second quarter results. The gaming retailer will report on Wednesday, September 8, after the closing bell.

The company’s financial performance will most likely improve due to the reopening of the economy, following the pandemic disruptions last year. However, it is unclear how much the financial results will impact GameStop stock’s  (GME) - Get GameStop Corp. Class A Report price action, given its meme status.

Wall Street Memes will cover GameStop's earnings via live blog on Wednesday, September 8. Tune in to thestreet.com/memestocks at 4 p.m. EST for up to two hours of analysis and discussions on the company's results and share price reaction.

Q1 earnings results recap

GameStop delivered above expectations results in the first quarter of 2021, reporting adjusted net loss of $29 million (GAAP $67 million). GME’s adjusted loss per share of $0.45 beat consensus loss of $0.83. The company’s $1.3 billion in revenues topped expectations by $115 million.

GameStop Q1 2021 Financial Results

GameStop Q1 2021 Financial Results.

During the earnings call, former CEO George Sherman said that GameStop’s 2021 was off to a strong start. One of the highlights was $771 million in total cash on the balance sheet, up $185 million year-over-year, and minimal debt.

The company shared plenty of news on the HR front. GameStop brought in key retail and technology managers and announced the hiring of new CEO Matt Furlong. Matt has a solid track record leading e-commerce in Amazon Australia.

Lastly, GameStop announced a secondary market offer of up to 5 million shares of common stock. The capital will be used for general corporate purposes, including growth initiatives, and balance sheet strengthening.

Previewing GameStop’s Q2 earnings

For second quarter earnings, below is a list of what Wall Street analysts expect to see:

  • Wall Street expects net loss per share of $0.67 in the second quarter. This number compares favorably to a pandemic-stricken second quarter of 2020, when GameStop delivered an adjusted loss of $1.40.
  • Analysts also expect $1.12 billion in revenues compared to a $942 million reported in the second quarter in the prior year. However, last year’s results were severely impacted by the COVID-19 crisis and store closures. Compared to second quarter 2019, this year’s Q2 revenues are forecasted to land 13% lower.

Regarding GameStop’s P&L results, keep the following in mind:

  • Net sales should continue to improve as the reopening of the global economies slowly unfolds. For reference, in the first quarter of 2021, net sales increased 25% YOY despite a 12% reduction in the global store fleet.
  • The company should continue to focus on fleet resizing in an effort to control costs and shift its business model in the direction of e-commerce. In the first quarter, 118 stores were shut down, leaving 4,698 stores in operation across the globe.
  • Looking forward, GameStop seems optimistic about the current console cycle. However, the management team recognizes that pandemic risks are still elevated, which explains the absence of firm financial guidance for the rest of the year.

GME stock: will earnings make a difference?

GameStop stock is this year’s meme stock pioneer, and its price has been arguably more heavily influenced by popularity on web forums than by business fundamentals. Anticipating share price movement is hard in this case, regardless of Q2 financial performance.

On the one hand, blowout earnings could reinforce bullishness among retail investors, and even encourage outsiders to look a bit closer into GME stock. On the other hand, an earnings disappointment could test the resolve of GME’s “diamond hand” investors.

For reference, GME currently has 17% of its float shorted, according to Yahoo Finance. With short interest this high, the upside risk that bears face ahead of earnings could be concerning for them.