Gamestop – GameStop‘s New CEO Didn’t Win Over Critics. The Stock Is Down.
CEO Matt Furlong’s first earnings call since stepping into his role in June was a bit of a dud. It lasted eight minutes and didn’t do much to win over critics.
stock (ticker: GME) was down 7.5% to $183.57 in Thursday morning trading following the company’s wider-than-expected net loss. That could change rapidly, as GameStop often swings based on nonfundamental factors like short seller activity, retail trader chatter, and options volume.
Wedbush analyst Michael Pachter titled his Thursday note to clients “Lots of Acronyms, Still No Strategy.” He said Furlong’s earnings call comments lacked substance on the company’s strategy, though he provided plenty of abbreviations—like “UX,” for “user experience,” UI for “user interface,” and “ATM” for “at-the-market stock sales.”
“My point, of course, is that they gave us a bunch of nonsense and didn’t give what investors were looking for,” Pachter told Barron’s.
The company did not field questions from analysts, nor retail investors like meme stock peer
AMC Entertainment Holdings
(AMC) did last month. Analysts like Pachter have been hoping for turnaround targets, aside from the somewhat vague objective of “delighting customers and delivering value for stockholders.”
“In addition to focusing on long-term opportunities, we took a number of steps over the past quarter to fortify the company’s infrastructure and technology,” Furlong said in the call. “We are focused on positioning GameStop to scale while obsessing over competitive pricing, expansive selection and fast shipping.”
Furlong declined to provide a formal outlook and mostly listed off previously announced hiring, customer care, and logistics investments. He did reveal a new fulfillment center in York, Pennsylvania, began shipping orders in the second quarter.
Pachter wrote that the company beat revenue expectations, growing sales 26% year-over-year despite a 9% reduction in GameStop’s global store fleet. He noted console launches last year from
will help GameStop return to profitability, but thinks meme stock factors like short seller activity and retail trader enthusiasm have sent shares to levels that are disconnected from fundamentals. He has an Underperform rating and $50 price target on the stock.
David Trainer, chief executive of investment research firm New Constructs, said the earnings report reflects a mediocre business and an overpriced stock.
“Even with the meme-stock crowd support, the weight of these realities is sinking the stock Thursday,” Trainer says. “GameStop’s sinking stock trend will continue until the stock falls back to the mid 20s—because the business is never going to be better than mediocre and the stock remains terribly overpriced as long as it is above $35 per share.”
Write to [email protected]