GameStop Earnings News: Market impressed by narrowing loss, but macro picture sinks GME
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- GameStop leapt on a successful Q2 reported late Wednesday.
- GME shares are trending lower on Thursday due to the macro picture.
- Losses narrowed from $109 million one year ago to less than $3 million.
- Revenue rose 2% YoY, and SGA costs were kept to a minimum.
GameStop (GME) stock jumped above $20 initially in Wednesday’s post-market when its second-quarter results were released to great fanfare. The video game retailer cut its ongoing losses down to smidgin and offered up the possibility of futures profits.
In Thursday’s premarket, however, the weight of a global sell-off in equities is weighing on GME’s share price. NASDAQ 100 futures fell more than 1% in the premarket, and S&P 500 futures are off 0.6%.
Barclay’s released a client note on Thursday arguing that the global economy is beginning to slow down. Barclay’s stated that 2023’s worldwide economic growth rate of 2.8% would fall to 2.3% next year. A number of Europeans countries, as well as China, have seen their service sectors begin to stall out this week, based on August data.
"The global economy should slow a little, as the US downshifts from the strong pace of early Q3 to a mild slowdown, though not a material recession,” said the Barclay’s report.
GameStop earnings news
GameStop lost $-0.03 per share in adjusted terms, which was 11 cents better than Wall Street consensus. Revenue of $1.16 billion, up 2% YoY, also bested the average forecast by $20 million.
GameStop has been holding on for dear life since covid hit and is finally starting to see real results. Growth in GameStop’s software segment made up for falling sales elsewhere. Software sales of $397 million rose 25.5% YoY.
Hardware sales, still the largest segment, were flat on an annual basis, while collectible revenue of $170 million declined 24% YoY.
By holding down expenses, GameStop was able to curtail its expected quarterly loss from nearly $109 million one year ago to just under $3 million in the quarter ending in July. This was contributed to by holding Selling, General and Administrative (SGA) costs down. SGA topped 34% of sales one year ago, but GameStop pushed that percentage to below 28% this time around.
"During the first quarter of fiscal 2023, we began the process of exiting our operations in Ireland, with all stores in the region closing in the second quarter of fiscal 2023,” the company said in a statement. “While we expect our cost containment efforts to yield reductions in SG&A expenses in the long term, we have incurred and may continue to incur severance and other non-recurring costs related to these efforts in the short term."
GameStop stock forecast
GameStop stock was already trending upward in the lead up to Wednesday earnings announcement. The Moving Average Convergence Divergence (MACD) indicator has crossed over in bullish fashio, and the 9-day Simple Moving Average (SMA) is narrowing its gap with teh 21-day SMA. GME has been recovering from a downtrend that began in mid-June and only began to reverse in late August.
GameStop bulls are gunning for GME to overtake either the $20 or $22 level. Both prices have acted as support before, so they are necessary for overcome in order to prepare for a broader setup. Any success there will lay the groundwork for a run at the $27 to $30 resistance range.
January and March’s support at $15.50 looms below, but investors will hope that those valleys are over and done.
GME daily chart
