Overview

Headquartered in Grapevine, Texas, GameStop Corporation is a retailer of video games and related products. Through its approximately 4816 stores (as of Jan 30, 20211), and e-commerce sites, the company, via brands such as GameStop, EB Games, Micromania, ThinkGeek, and Zing Pop Culture, sells video games platforms (both new and pre-owned), gaming peripherals, video game software (both new and pre-owned), as well as game downloads.

GameStop Stock (GME), however, is best known today by investors as the one that initiated the "meme stocks" trend in January 2021. Starting off a short-squeeze, coordinated by users of Reddit's r/WallStreetBets subreddit, traders sent GME stock from around $20 per share, to as much as $483 per share, in less than two weeks.

The squeeze resulted in an abnormal amount of trading in the stock, with daily volume going from around 14.9 million on Jan 11, to as much as 197.2 million on Jan 22. Heavy trading in GME stock, along with other Meme Stocks such as AMC Entertainment led to trading disruptions, as well as trading restrictions, on brokerage platforms such as Robinhood and TD Ameritrade.

Some individual investors, such as Keith Gill, better known as "Roaring Kitty,2" made millions from the trade. In contrast, hedge funds Melvin Capital saw considerable losses.3 To shore up its heavy losses, Melvin received a $2.8 billion bailout from Citadel and Point72 Asset Management4. Peaking in late January, GME stock fell back under $50 per share in mid-February. However, in March, a second squeeze occurred in the stock, sending it back between $200 and $300 per share. 

Recent Developments

Since the history-making squeezes earlier this year, short interest in GME stock has come down. Despite this, shares remain up more than 960% year-to-date (as of Nov 26, 2021). Many of the individual retail investors who participated in the squeeze still hold the stock. This is similar to the situation with AMC Entertainment, where self-proclaimed "Apes" continue to make up a large portion of its shareholder base.

Also similar to AMC, GameStop is taking active efforts to turnaround its operations. Shortly after the short squeeze, an activist investor took control of GameStop's board of directors. Ryan Cohen, co-founder of pet product e-commerce platform Chewy, who had acquired a large position in GME stock, was elected Chairman in April 20215.

With control of its board, Cohen is working to transform the company from a largely bricks-and-mortar video game retail, to an e-commerce platform akin to Amazon6. Filling the C-suite with former Amazon and Chewy executives/managers, the company is also building out its distribution/fulfillment infrastructure7. GameStop is also rumored to be entering the NFT (non-fungible token) business, based upon job postings on its website8

To finance its transformation, GameStop conducted secondary equity offerings in April 20219 and June 202110. Through these offerings, GameStop raised a total of $1.65 billion. 

Financial Highlights

Income Statement

In the trailing twelve months (TTM), GameStop has generated $5.59 billion in revenue11. Compared to sales for fiscal 2021 (ending January 2021), the company is showing slight improvement, thanks to end of 2020's Covid-19 lockdown orders. However, sales remain down substantially from levels posted in prior fiscal years. This is more a product of the terminal decline of its bricks-and-mortar business than it is a product of the pandemic.

With its decline in sales over the past few years, the company has posted negative EBITDA. In fiscal 2021, GameStop had negative EBITDA of $168.6 million. This EBITDA loss has started to narrow, as seen from TTM EBITDA figures (negative $72.2 million).

As the company is posting negative operating margins, net losses remain high as well. In the past twelve months, GameStop has reported negative net income of $66.9 million, or 99 cents per share. For Fiscal 2022 (ending January 2022), sell-side analyst project negative earnings per share (EPS) of 64 cents12.

Balance Sheet

As of Jul 31, 2021, GameStop had $1.72 billion in cash on hand13. This is a product of the two secondary offerings completed in April and June 2021. Total assets total $3.55 billion, most of which is made up of current assets ($2.65 billion), with the balance made up of long-term assets (primarily operating lease right-of-use assets).

Liabilities total $1.69 billion. $1.194 billion are current liabilities, with the balance made up primarily of a long-term lease liability that counters the aforementioned right-of-use assets.

Recent Results

For the quarter ending Jul 31, 2021, GameStop generated $1.183 billion in sales14, up 25.5% from the prior year's quarter ($942 million). Net losses came in at $61.6 million (85 cents per share), narrowing from the $111.3 million ($1.71 per share) quarterly loss reported in the quarter ending Jul 31, 2020.

GameStop will next release quarterly results (for the October quarter) after the market close on Dec 8, 2021.

  1. ^ https://www.sec.gov/ix?doc=/Archives/edgar/data/1326380/000132638021000032/gme-20210130.htm
  2. ^ https://www.cnbc.com/2021/02/17/roaring-kitty-keith-gill-defends-gamestop-posts-says-he-is-as-as-bullish-as-ever-on-the-stock.html
  3. ^ https://www.institutionalinvestor.com/article/b1vgwsmwsc2v61/melvin-capital-s-comeback-plan
  4. ^ https://markets.businessinsider.com/news/stocks/steve-cohen-ken-griffin-invest-3-billion-gamestop-short-seller-2021-1
  5. ^ https://www.marketwatch.com/story/gamestop-stock-rallies-after-plans-to-name-ryan-cohen-as-chairman-2021-04-08
  6. ^ https://www.businessinsider.com/ryan-cohen-gamestop-transformation-ecommerce-explained-2021-3
  7. ^ https://nypost.com/2021/05/03/gamestop-signs-lease-for-massive-distribution-warehouse-ditches-debt/
  8. ^ https://cointelegraph.com/news/redditors-cheer-as-gamestop-assembles-team-of-nft-experts
  9. ^ https://news.gamestop.com/news-releases/news-release-details/gamestop-completes-market-equity-offering-program
  10. ^ https://news.gamestop.com/news-releases/news-release-details/gamestop-completes-market-equity-offering-program-0
  11. ^ https://seekingalpha.com/symbol/GME/income-statement
  12. ^ https://finance.yahoo.com/quote/GME/analysis?p=GME
  13. ^ https://fintel.io/bs/us/gme?d=1000&t=q
  14. ^ https://gamestop.gcs-web.com/news-releases/news-release-details/gamestop-reports-financial-results-q2-2021
Tags: US:GME
Created by Thomas Niel on 2021/11/27 12:09
     

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