GME Stock: With trading frenzy likely over, what the future holds for Gamestop?

Video streaming sites and gaming platforms have been experiencing unusually high traffic ever since the virus-related movement restrictions came into effect last year, but conventional players like Gamestop Corporation (NYSE: GME) were left out of the boom.

Media-driven Rally

In a surprise turn of events, the struggling game retailer hit the spotlight after its stock went on a roller-coaster ride in the early days of the year and made unusually strong gains. Interestingly, a large part of those gains was sustained though the stock withdrew later and entered a volatile phase.

GME, which was deemed a hot pick at one point, is probably one of the riskiest investments currently. It makes sense to adopt a wait-and-watch policy as far as investing is concerned because a major pullback is very much in the cards. Those currently holding the stock might feel an urge to sell, especially after this week’s post-earnings selloff.

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Read management’s comments on Gamestop’s Q2 results

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The company’s financial performance during the pandemic has been unimpressive as the bottom-line mostly languished in the negative territory, which marked a deterioration compared to its performance in the pre-crisis period.  

Growth Plan

If the growth plan is any indication, the management looks determined to bring back Gamestop’s lost glory. Currently, the focus is on investing in long-term growth initiatives like product-catalog revamp and expansion of the fulfillment network. The top priorities also include ensuring an improved customer experience and delivering value for stockholders. The ongoing efforts to strengthen the balance sheet – the company raised around $1.1 billion recently through a stock offering – should help it meet the near-term goals.

The question is whether the aggressive efforts to expand infrastructure and scale the business alone would help the company stay relevant in today’s digital-oriented gaming industry. Meanwhile, it needs to be seen to what extent would the company’s e-commerce initiatives help its sales performance. Store closures and continuing operating losses are the main challenges facing it.

Our new 700,000 square foot facility in York, Pennsylvania also began shipping orders during the quarter. We grew our catalog by adding new products and leading brands across consumer electronics, collectibles, toys, and more. We signed a lease on a new customer care facility in South Florida and started adding talent to that team as we continue to build out customer care operations in the US. Lastly, we further strengthened our balance sheet and capital position by raising more than $1.1 billion in net proceeds from the June ATM program.

Matt Furlong, chief executive officer of GameStop

Mixed Q2

In the second quarter of 2021, the adjusted loss narrowed to $0.76 per share from $1.42 per share in the prior-year period but missed analysts’ estimates. Revenues moved up 26% annually to $1.18 billion and came in above the forecast. The company ended the quarter with a cash balance of $1.78 billion.

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GME fell about 9% during Wednesday’s extended trading session soon after the earnings release — as it did in most of the earlier occasions — but pared a part of the loss later. Trading close to the $200-mark, the stock closed the last session slightly higher.