GameStop Reports 25% Rise in Q1 Revenue

Videogame retailer GameStop (GME) reported strong Fiscal 2021 first-quarter results on June 9.

Revenue rose 25.1% year-over-year to $1.3 billion and beat consensus estimates of $1.2 billion. Management noted that sales increased even though the company operated fewer stores in the quarter. GameStop stores continued to be closed across Europe because of the COVID-19 pandemic.

The adjusted loss of $0.45 per share improved from a loss of $2.44 per share a year ago and beat consensus expectations for a loss of $0.83 per share.

GameStop did not provide guidance for the second quarter but said it continues to see momentum in sales trends. Total sales in May jumped 27% compared to the same period last year.

Alongside the quarterly results, the company said it may sell up to 5 million shares to raise money to invest in growth initiatives and keep its balance sheet strong. Shares fell around 27% on Thursday on concerns by shareholders over the potential dilution of their holdings. GameStop finished Q1 with cash and restricted cash of $770.8 million and no long-term debt. (See GameStop stock analysis on TipRanks)

Additionally, GameStop announced the appointment of former Amazon executives Matt Furlong and Mike Recupero as CEO and CFO, respectively. “The Company is continuing to actively pursue senior talent with gaming, retail and technology experience,” GameStop said in a press release.

Wedbush analyst Michael Pachter reiterated a Sell rating on GameStop stock but raised the price target to $50 from $39. The analyst’s new price target implies 77.31% downside potential.

Pachter commented that the short squeeze in recent months has driven GME stock price up to levels not aligned with fundamentals. However, the analyst sees GameStop returning to profitability by 2021.

Consensus among analysts is a Moderate Sell based on 1 Buy, 1 Hold, and 3 Sells. The GameStop average analyst price target of $70 implies 68.24% downside potential to current levels.

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