GameStop Stock Keeps On Disappointing Investors, But A Bullish Trend Might Be On Its Way

June 03, 2022 at 10:21 AM EDT

Investors’ expectations for a revival at gaming retailer GameStop Corp. (NYSE: GME) were not met last quarter. However, as the company reports consumer growth, the stock might enter the bullish zone soon, analysts say.

According to GameStop’s latest financial results, the company’s inventory grew to $917.6 million, up from 570.9 million at the same time last year. The reduction in hardware sales was compensated by an increase in software and collectible sales, according to the business.

A social media-fueled trading frenzy engulfed GameStop last year, lasting months. So far, the firm’s stock hasn’t risen as dramatically as it did in the first few months of this year, despite the company reorganizing its leadership to diversify its business and return to profitability.

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Over the past year, its stock has lost more than half of its value. Within the same period, the Nasdaq Composite Index dropped 13%.

After the firm revealed its financial results on Wednesday, its stock jumped almost 3% in early after-hours trade.

With sales and strategic mistakes at an all-time low, GameStop’s leadership team and board of directors were revamped in June. Activist investor Ryan Cohen was elected as chairman of the board, and the corporation hired two Amazon veterans to lead the company.

Because of the decline in demand for the physical discs that GameStop sells, the gaming shop has had difficulty making a profit. Publishers are also producing more free games with in-game purchases that allow them to make money.

It has been Mr. Cohen’s goal to help GameStop strengthen and grow its e-commerce business as part of the company’s turnaround efforts. Additionally, the business has released a digital wallet that it claims will allow gamers and others to purchase, sell, and trade NFTs on a marketplace it creates for gamers and others to trade.

Michael Pachter, a Wedbush analyst, has expressed doubts about GameStop’s NFT intentions, claiming that big console and mobile game makers are unlikely to enable third parties such as GameStop to take a large share of customer spending on digital products. This is partly due to a drop in demand for physical software and supply-chain congestion that has made it difficult for retailers to get gaming consoles for sale in their shops.

As a result of these challenges, a “substantial cash burn” may be on the horizon for the next year or more, according to Mr. Pachter.

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