What happened
Never a stock for the fainthearted, GameStop (GME 5.93%) is living up to its volatile reputation Friday after it reported its fourth-quarter and full-year results after the market closed Thursday. The initial reaction to those numbers sent the stock plunging by as much as 10%. But less than an hour into the trading session, shares were back in the green and gained as much as 7.2% at the morning's peak. As of 1:43 p.m. ET, the stock had settled to a gain of 5.2%.
So what
Traders' initial reaction made sense. GameStop reported a large net loss for the holiday quarter, when analysts had expected a profit. But in typical meme stock fashion, the price trajectory then reversed course.
Image source: Getty Images.
Now what
In the video game retailer's most important quarter of the year, it reported a net loss of $1.94 per share, or $147.5 million. On an adjusted basis, the company lost $1.86 per share; on average, analysts had expected a profit of $0.85 per share, according to FactSet.
CEO Matt Furlong addressed the shortfall on the company's conference call, saying, "the combination of supply chain issues and the omicron variant had a sizable impact on this past year's holiday season. We made the conscious decision to lean in and absorb higher costs in order to meet customer demand."
Those share buyers who bid the price back up on Friday may have been more focused on what they hope will drive the company in the future. Furlong told investors that the company still expects to launch a non-fungible token (NFT) marketplace by the end of the second quarter. He estimates the NFT market will eventually reach a value of more than $40 billion.
But that market is far from developed at this point, and GameStop's eventual place in it (if it manages to stake one out) has yet to be secured. The buyers who brought the stock back into the green Friday are seemingly continuing to base their investment thesis on hopes and dreams rather than actual business results.
