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It's Game Over for More Than Just GameStop's CFO

By Rick Munarriz - Feb 24, 2021 at 9:05AM

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A key executive is moving on, but he's not the only one leaving GameStop.

There's never a dull moment when it comes to GameStop (GME -4.95%). Shortly after Tuesday's market close the video game retailer announced that CFO Jim Bell will be leaving the company next month. 

Investors tend to fret when CFOs move on, but that's an overblown concern here. GameStop has done nothing but put up unimpressive financials over the past few years. If there's any funny business going on here GameStop is doing as bad a job of that as it is selling video games. In short, GameStop's CFO leaving is a nonevent. Investors have a lot more to worry about here.

Two shoppers looking over video games on a shelf.

Image source: Getty Images.

Eyes on the prize 

There hasn't been a wilder stock than GameStop over the past year. A year earlier the shares were trading for less than $4. Four weeks ago the shares hit an all-time high of $483. The stock finds itself at an interesting juncture here. It's trading more than 90% below last month's high, but it would have to shed more than 90% from here to return to where it was a year ago.

The spotlight has moved elsewhere these days. Less than 7 million shares of GameStop traded on Tuesday, its lightest volume in more than six weeks. The speculators involved in this tug-of-war have found fresh rope elsewhere to tug. 

GameStop is now being carried by its fundamentals, and that's going to be cruel gravity for the thinning herd of bullish believers. GameStop's in trouble. The once profitable company that was the envy of the strip mall has posted three fiscal years of massive losses. Revenue has declined in four of the past five years, and that includes sharp double-digit declines in back-to-back years. 

You don't need to be a rocket scientist to pinpoint the problem with GameStop. The irony here is that the youngish speculators who have been rallying behind the chain are probably the same gamers seeing the concept fade before their very eyes. Games are going digital, and that means an end to physical games and -- more importantly -- GameStop's high-margin resale business. You can't trade in a download. 

GameStop fared well over the holidays by selling a ton of big-ticket PS5 consoles, but revenue still went the wrong way because it has closed 11% of its stores over the past year. There's still time for GameStop to reinvent itself, but it's been burned in the past by trying to embrace digital delivery and broaden its scope to sell collectibles and board games. 

Like a game that has gotten stale, traders aren't playing GameStop anymore. Short interest is a third of what it was at the midpoint of last month, fueling the initial short squeeze. Trading volume is slipping.

This is, at the end of the day, yet another fading retail stock that in its current state and current trajectory isn't worth its nearly $4 billion in enterprise value. There's still a chance for GameStop to turn things around, but the clock is ticking -- even if sometimes it seems as if nobody is still hanging around to listen.

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