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GameStop Shares Slump After Videogame Retailer's Q3 Results and Outlook Miss Mark

Shares of the videogame retailer dropped double digits Tuesday.
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GameStop shares dropped double digits in after-hours trading Tuesday, after the videogame retailer missed analyst estimates for its third quarter and in its outlook.

For the quarter ended Nov. 2 the Grapevine, Texas, company reported a net loss of $1.02 a share, narrowed from a loss of $4.78 in the year-earlier quarter. 

The adjusted loss from continuing operations was 49 cents a share, compared with earnings of 49 cents a year earlier.

Revenue fell 26% to $1.44 billion. 

Analysts were expecting the company to report earnings of 11 cents a share on revenue of $1.62 billion.

For the year, the company expects adjusted earnings of 10 to 20 cents a share, short of Wall Street’s expectation of earnings of $1.21 a share.

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“We remain on track to achieve our $200 million annualized operating-profit improvement goal by 2021, and we believe our strategic initiatives will enable to us to achieve our long-term growth and profit objectives,” CEO George Sherman said in a statement.

GameStop shares have fallen nearly 50% year to date as investors worry about competition from digital videogame subscription services like Google’s  (GOOGL) - Get Alphabet Inc. Report Stadia.

The stock is trading at about 7x forward earnings, nearly half the industry average of 13.5x.

Also weighing on the stock is the industry shift toward the next generation of consoles, leaving the current generation of videogame players reticent to spend much more on technology that is about to become obsolete.

“With console makers set to introduce new and innovative gaming consoles late next year, we anticipate this trend to continue until the fourth quarter of 2020,” Sherman said.

At last check GameStop shares were trading down 19% at $5.30.