Shares in this article
?? GameStop shares have seen extreme volatility
?? Current balance sheet figures rather mixed
?? Is the current assessment justified or is there a crash? A few days ago there was another strong price movement in the GameStop share, but this time not due to small investors gathered to buy shares. Rather, the balance sheet presentation caused a price slide, which amounted to 33 percent at the end of March 24th.
GameStop’s balance sheet disappoints expectations – bright spot?
GameStop continues to suffer from a downturn in its business – it became known when the latest financial figures were released. Although profits nearly quadrupled to $ 80.5 million for the three months ended January, expectations were disappointed. And while online sales grew 175 percent, sales fell year over year. The operating cash flow also suffered as a result, according to “Seeking Alpha”. Looking at the year as a whole, it looks similar: Revenues fell by around 21 percent to 5.1 billion US dollars, with a loss of 215.3 million US dollars.
A large part of the overall decline is due to the corona-related crash in March 2020 – the closure of 693 stationary stores contributed to this. The comparable branch sales are said to have increased by 6.5 percent in the fourth quarter, which exceeded the 4.7 percent expected by the analysts.
The only 3.3 percent drop in sales could give a little consolation: The rather small decline should be a ray of hope for investors, according to the news site “Seeking Alpha”. However, one must bear in mind that these figures include the rotation in the hardware cycle with the ninth generation of consoles from Microsoft and Sony. The strong hardware and accessories sales are therefore not a lasting boost.
GameStop’s future – out of the store, more online
According to “Seeking Alpha”, a look at EBITDA in particular does not bode well, because if this number is in the negative range, this indicates problems in the company. But there are also positive points about the current situation of the video game retailer: above all the increasing e-commerce sales. In the fourth quarter of 2020 it was 34 percent of sales – in the same quarter a year earlier, this figure was only 12 percent.
Shop sales have been declining for years, which is why numerous branches had to close their doors even before Corona. In 2016, according to “Seeking Alpha”, the company still operated 6,132 branches, compared to 4,816 today.
In this regard, GameStop’s focus on a new strategy also plays a significant role. This includes saying goodbye to the classic retail chain to a provider of online gaming.
However, it is not possible to say for sure whether this relocation will actually save the country. Because most of the growth in video games is in the mobile sector or on the PC and software side, reports “Seeking Alpha”. Categories in which GameStop has not yet established itself. Because in the fourth quarter of 2020, the Group’s software sales were 25.7 percent below the value of the previous year. Online sales alone are unlikely to be able to carry GameStop’s upheaval alone. A focus on software with specially created content, on the other hand, could make a difference, speculates “Seeking Alpha.”
GameStop’s market capitalization and share at a glance
Positive and negative news seem to be in balance at the moment and sometimes have more and sometimes less influence on the paper. But how the conversion of the video game retailer is implemented should have a noticeable impact on the recently shaken share. GameStop’s share is still at a higher level, at around 180 US dollars – since the beginning of the year, the price has increased by more than 860 percent despite the striking turbulence. Whether this assessment is justified is debatable.
Seeking Alpha therefore states that it could have a positive impact if the company actually did new shares would spend. A larger amount of common stock could help justify its current market cap of $ 12.66 billion (as of March 29, 2021). GameStop mentioned a possible share issue in the balance sheet publication, but details on this project are pending. Depending on how things continue, the US corporation’s share price may face a drastic fall, says “Seeking Alpha”: It could go down to $ 20.
Finanzen.net editorial team
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stock hype strategy ineffective save GameStop shares crash message