Volatility is on the menu for GameStop (GME 7.58%) investors next week. The reinvigorated video game retailer reports fresh results on Wednesday afternoon, and the only thing that's certain is that the stock will move.
GameStop investors know all about buckling up for a wild ride. This is the meme stock that kicked off this year as a scintillating 17-bagger in January, only to go on to shed nearly half of its value through the balance of 2021.
Will the stock move higher or lower next week? GameStop is one of the biggest gainers since bottoming out nearly two years ago, but earnings season has typically been brutal for the specialty retailer's stock.
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Three years of respawning
GameStop has been a strong performer for long-term shareholders, but it has often imploded during earnings season. The stock has fallen -- and often sharply -- the day after the company reports fresh financial results.
- Nov. 29, 2018: down 6.7% the next day
- April 2, 2019: down 4.7%
- June 4, 2019: down 35.6%
- Sept. 10, 2019: down 9.8%
- Dec. 10, 2019: down 15.1%
- March 26, 2020: down 4.3%
- June 9, 2020: up 2.2%
- Sept. 9, 2020: down 15.2%
- Dec. 8, 2020: down 19.4%
- March 23, 2021: down 33.7%
- June 9, 2021: down 27.2%
- Sept. 8, 2021: up 0.2%
The shares have taken a hit the trading day after posted quarterly results in 10 of the past 12 reports, averaging an 11.8% decline for the day over those three years. We're talking about a double-digit percentage hit in five of the six previous quarters.
Optimists will counter that one of the two positive days took place last time out. GameStop stock initially opened 9.4% lower, only to claw its way back by the end of the trading day. It's still problematic that the biggest gain for GameStop shares over the past dozen earnings reports is a mere 2.2% advance (in the spring of last year).
Expectations aren't necessarily high. Analysts see a loss of $0.52 a share, and red ink is the norm here outside of the current holiday quarter. It has fallen short of Wall Street's bottom-line expectations in two of its past three reports. The $1.19 billion that analysts see in net sales is a decent 19% advance from the prior year's pandemic-saddled quarter, but 17% below where it landed for the same three months two years ago.
Will sales consist mostly of low-margin hardware sales? Are some of the long-term growth initiatives that GameStop began exploring earlier this year starting to pay off? Can anything the company say during its Wednesday afternoon earnings call trigger another meme stock rally?
GameStop will have to do something that it has rarely done over the past three years -- impress the market after announcing fresh financials. The market is still unsure where GameStop fits in the realm of video game stocks. The console makers and software developers are trying to cut out the retail middleman, making direct connections with diehard gamers. GameStop is trying to remain relevant as it expands its product offerings and enhances its fulfillment network. It still has an iconic brand and a large retail footprint across the country. But that may not be enough, and investors are bracing for a big move up or down next week.
