The stock market can be a volatile place, and GME stock is a prime example of that. After their latest earnings report, GME stock had a dramatic 35% slide, leaving many investors scratching their heads. In this blog, we will unpack the dramatic slide in GME stock and analyze what caused the slide and how much further GME stock can drop. We will also answer the question of whether GME stock is a good investment right now.
GME Stock Overview
GME stands for GameStop Corp. They are a retail video game chain based in Grapevine, Texas. They are one of the largest video game retailers in the world, with over 6,500 stores in the United States and Europe. GME stock is traded on the NYSE (New York Stock Exchange) and is one of the most heavily traded stocks on the exchange.
GME stock has been on a rollercoaster ride for the last few months. It has seen huge highs and lows, and the most recent low was triggered by their latest earnings report.
Earnings Report
In anticipation of its upcoming earnings announcement, will GameStop persist in its recent downtrend or will it experience a surge? Before discussing the reactions from investors and analysts, let’s take a brief look at its most recent financial report to grasp the main drivers of the GME stock.
Approximately four weeks have passed since the GameStop Corporation (GME) last reported its earnings, and its stock has declined by 34.6% in that period, which is more than the S&P 500. Will this negative momentum continue to the next earnings report, or will GME make a recovery? To gain an understanding of the critical influences, let’s briefly review the corporation’s most recent financial statement.
GameStock is now at the time as we written this article16.46 USD:
GameStop disclosed a larger-than-anticipated loss in the third quarter of the fiscal year.
GameStop’s loss for the third quarter of 2022 was larger than expected, but still not as bad as the same period in the previous year. The company’s overall revenue was lower than predicted and lower than the same quarter of the previous year.
Analyzing the Dramatic 35% Slide in GME Stock
This dramatic 35% slide in GME stock has left many investors wondering what caused it. Was it an overreaction to the earnings report? Was it due to fears of a potential decline in the video game industry? Or was it something else entirely?
In order to answer these questions, we need to look at the fundamentals of the company.
GME Stock: The third quarter in terms of specifics
GameStop recorded an adjusted loss of 31 cents per share for the third quarter of 2022, which was narrower than the Zacks Consensus Estimate of a loss of 29 cents. The company had reported a loss of 35 cents a share in the same quarter of the previous year. However, net sales totaled $1,186 million, which was below the Zacks Consensus Estimate of $1,382 million and also lower than the prior-year figure of $1,296.6 million. Management noted that sales resulting from new and expanded brand partnerships remained strong. Hardware and accessories sales were $627 million, down from the $669.9 million posted in the previous year’s quarter. Software sales decreased to $352.1 million from $434.5 million in the prior-year period. Collectibles sales were $207.3 million, compared to $192.2 million in the corresponding quarter of the previous year.
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The gross profit decreased to $291.6 million from the $318.6 million reported in the previous fiscal quarter, with the gross margin staying unchanged year-on-year at 24.6%. The adjusted SG&A expenses dropped to $386.6 million from the $421.5 million recorded in the same quarter of the previous year. The adjusted operating loss for the current quarter was $95 million as opposed to the adjusted operating loss of $102.9 million in the corresponding quarter of the past year. The adjusted EBIDTA loss was $66.6 million, which is slightly lower than the $79.8 million adjusted EBIDTA loss reported in the prior-year fiscal quarter. If you’re looking for stock recommendations, Zacks Investment Research provides seven of the best stocks to invest in for the next 30 days.
What Caused the Slide?
When analyzing the slide in GME stock, it is important to look at the fundamentals of the company. The earnings report showed that revenue was up but profits were down. This means that the company is spending more money than it is bringing in, which is not a good sign.
The company is also facing increased competition from other video game retailers, such as Amazon and Walmart. This could be putting pressure on GME’s profits, as these larger retailers can often offer lower prices due to their size and bargaining power.
| Index | – | P/E | – | EPS (ttm) | -1.68 | Insider Own | 15.62% | Shs Outstand | 304.20M | Perf Week | -10.20% |
| Market Cap | 4.94B | Forward P/E | – | EPS next Y | -0.59 | Insider Trans | 0.00% | Shs Float | 256.96M | Perf Month | -29.63% |
| Income | -508.80M | PEG | – | EPS next Q | -0.13 | Inst Own | 26.00% | Short Float / Ratio | 21.29% / 11.16 | Perf Quarter | -36.67% |
| Sales | 5.95B | P/S | 0.83 | EPS this Y | -59.10% | Inst Trans | -4.55% | Short Interest | 54.71M | Perf Half Y | -48.78% |
| Book/sh | 4.09 | P/B | 4.02 | EPS next Y | 55.00% | ROA | -16.00% | Target Price | 12.65 | Perf Year | -49.11% |
| Cash/sh | 3.47 | P/C | 4.74 | EPS next 5Y | – | ROE | -36.10% | 52W Range | 15.89 – 49.85 | Perf YTD | -10.83% |
| Dividend | – | P/FCF | – | EPS past 5Y | -30.50% | ROI | -22.60% | 52W High | -66.98% | Beta | -0.04 |
| Dividend % | – | Quick Ratio | 0.90 | Sales past 5Y | -5.50% | Gross Margin | 21.00% | 52W Low | 3.59% | ATR | 1.53 |
| Employees | 12000 | Current Ratio | 1.60 | Sales Q/Q | -8.50% | Oper. Margin | -8.80% | RSI (14) | 29.41 | Volatility | 7.74% 7.79% |
| Optionable | Yes | Debt/Eq | 0.03 | EPS Q/Q | 10.30% | Profit Margin | -8.50% | Rel Volume | 0.98 | Prev Close | 16.22 |
| Shortable | Yes | LT Debt/Eq | 0.02 | Earnings | Dec 07 AMC | Payout | – | Avg Volume | 4.90M | Price | 16.46 |
| Recom | 4.00 | SMA20 | -17.71% | SMA50 | -30.74% | SMA200 | -44.88% | Volume | 4,823,357 | Change | 1.48% |
How Much Further Can GME Stock Drop?
It is impossible to say for sure how far GME stock can drop, as the stock market is unpredictable. However, based on the fundamentals of the company and the current market conditions, it is likely that the stock could drop further. If the company does not show signs of improvement in their next earnings report, then the stock could continue to decline.
Is GME Stock a Good Investment Right Now?
GME stock is not a good investment right now, as the company is facing a number of headwinds that could lead to further declines in the stock price. The company needs to show signs of improvement in their next earnings report in order to turn their fortunes around. Until then, investors should stay away from GME stock.
Conclusion
GME stock has had a dramatic 35% slide after their latest earnings report. This has left many investors wondering what caused the slide and how much further it can drop. We have analyzed the slide and looked at the fundamentals of the company to try and answer these questions. We have also concluded that GME stock is not a good investment right now, as the company is facing a number of headwinds. Investors should stay away from GME stock until the company shows signs of improvement in their next earnings report.
