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Vladimir Zernov
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Gamestop GME

GameStop Video 24.03.21.

GameStop’s Quarterly Results Missed Analyst Estimates

Shares of GameStop gained strong downside momentum after the company reported its quarterly results. GameStop reported revenue of $2.1 billion and GAAP earnings of $1.18 per share, missing analyst estimates on both earnings and revenue.

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The company did not provide guidance for 2021 but stated that it would focus on its transformation, which was one of the pillars of the bullish thesis for the stock.

GameStop also stated that it was evaluating a potential increase in the size of the at-the-market program to fund its growth initiatives, which means that an equity sale may be around the corner.

Interestingly, the potential equity sale was not mentioned during the earnings call, while the earnings call itself did not had a Q&A session with analysts which is highly unusual given the huge interest in the stock.

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What’s Next For GameStop?

GameStop’s rally was driven by the activity of retail investors, and now these investors had a chance to take a look at the fundamental situation in the company.

The quarterly report revealed nothing that could justify the recent huge rally as the company even failed to meet analyst estimates on earnings and revenue. In addition, GameStop did not take questions during the earnings call which could be taken as a sign of weakness.

While the huge short interest in the company’s shares served as the main catalyst for the rally back in January, the rally in March was also driven by traders’ hopes for a robust transformation of the company.

If this story gets busted, GameStop shares will gain significant downside momentum and may get back to levels seen in the second half of February before the stock attracted more interest.

It should be noted that trading dynamics of GameStop stock remain heavily dependent on market mood rather than fundamentals, so traders should be prepared for very fast moves.

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