GameStop Earnings Preview: Profits, Turnaround Plans Remain Elusive – Can NFTs Light The Way?

Updated at 911:14 am EST

GameStop  (GME) – Get GameStop Corp. Class A Report shares edged lower Thursday ahead of its fourth quarter earnings after the close of trading, with investors looking for long-awaited details underpinning the video game retailer’s turnaround plan.

The group, which has put in place a new management team under chairman Ryan Cohen, has yet to fully articulate its new strategy, and has largely kept its post-earnings updates limited to a brief statement on customer trends and the state of its balance sheet.

That said, the Grapevine, Texas-based group essentially confirmed reports that it plans to develop a market for so-called NFTs, or non-fungible tokens, related to its video game products, following a tie-up with Australian blockchain startup ImmutableX last month and the launch of a dedicated website last year. 

Chainalysis, a blockchain data platform, recently estimated the global value of NFT trading at around $41 billion. 

GameStop may also unveil new pacts with crypto currency groups as it pivots towards an e-commerce lead strategy under CEO Matt Furlong, a former Amazon  (AMZN) – Get Amazon.com, Inc. Report executive. 

The group may also add further detail to its disclosure of an an SEC subpoena in December linked to an earlier probe into GameStop trading activity.

Investors may also wonder how much attention Cohen can devote to GameStop’s turnaround following a move by his RC Ventures LLC ventures group to take a 10% stake in meme-stock colleague Bed, Bath & Beyond  (BBBY) – Get Bed Bath & Beyond Inc. Report and push for changes in the struggling home furnishings retailer earlier this month.

Scroll to Continue

GameStop shares were marked 1% lower in early Thursday trading to change hands at $85.90 each, a move that would extend the stock’s year-to-date decline to around 44%. 

GameStop, one of the original ‘meme stock’ stars that was once valued at $23 billion during last year’s retail-driven frenzy, closed with a market cap of $6.6 billion last night and continues to post money-losing quarters.

Despite raising $1.7 billion from new stock sales, generating $1.3 billion in revenues over the three months ending in October, hiring a new executive team — and putting a star digital company chairman, Ryan Cohen, in place — GameStop is still on pace to lose between $1.00 and $1.54 per share over its 2021 financial year, which ends in January. Analysts are expecting a 4.4% increase in overall revenues for the fourth quarter, taking the total to $2.215 billion.

As a result, short interest in GameStop remains notably elevated, according to recent data from Ortex, with combined bets against the group representing around 21% of the stock’s outstanding float.

Short sellers are investors who bet against a certain stock by selling them on various exchanges or platforms in the hope of buying them back at a lower price in the future and pocketing the profits.

Wall Street pros argue that short sellers provide several key functions in the market, including price discovery and additional liquidity, while critics counter that some rely on “predatory” practices that can damage companies and wipe-out small investors.

A detailed report from the SEC in October established that GameStop earned its meteoric 2021 rise as a result of positive investor sentiment, and not short-sellers, amid the meme-stock frenzy that began in January and pushed GameStop’s market value to as high as $23 billion.

The SEC said that while short-sellers were active in betting against the stock, its rise was powered by investors who believe in the company — and their use of ‘game like’ trading apps — by professional traders scrambling to cover their short positions.