GameStop Analyst Braces For Muted Q3 Performance, Retail Cautious: Will ‘Roaring Kitty’ Provide The Spark?

Video game retailer GameStop Corp. ($GME) is all set to report its fiscal year 2024 third-quarter results after the market closes on Tuesday. 

The imminent report has generated a lot of excitement among the retail crowd after last week’s cryptic post by Keith Gill, aka ‘Roaring Kitty’ - the name behind the 2021 meme stock frenzy.

Grapevine, Texas-based GameStop is widely expected to report a third-quarter loss of $0.03 per share compared to break-even results in the year-ago quarter.

Revenue is estimated at $887.68 million, down from the $1.08 billion reported for the year-ago quarter. The company’s top-line performance missed expectations in each of the past four quarters.

GameStop’s cash position was at $4.204 billion at the end of the second quarter.

In late September, the company raised gross proceeds of $400 million through an “at-the-market” equity program. It said then that it intends to use the proceeds for general corporate purposes, including acquisitions and investments.

In a note released last week, Wedbush’s Michael Pachter said he expects GameStop to report break-even earnings per share (EPS) and revenue of $900 million. 

“GameStop should benefit from stable industry sales in the quarter, but the ongoing mix shift towards digital likely led to underperformance in the quarter,” the analyst said.

The analyst expects GameStop’s profits to benefit from the mix shift toward software, with significantly higher interest income from recent stock offerings offsetting the ongoing operating losses.

While the company has stopped providing formal sales and earnings guidance from 2019, Pachter sees 2024 EPS and revenue at $0.01 and $4.03 billion, respectively.

GME sentiment and message volume December 10, 2024, as of 10:02 am ET | Source: Stocktwits

On Stocktwits, sentiment toward GameStop stock stayed ‘neutral’ (46/100), with message volume perking up to ‘normal.’

GameStop shares fell 1.36% to $27.55 in early trading on Tuesday. The stock has gained more than 53% this year.

Wedbush has an ‘Underperform’ rating for GameStop shares and a $10 price target. “GameStop has roughly $10 per share in cash now, but with no clear strategy to reasonably deploy capital, we don’t believe shares should trade at 3x cash,” the firm said.

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