GameStop analysts ‘frustrated’, ‘skeptical’ over lack of response plan details

Lack of details about GameStop’s (GME) The recovery plan, the lack of guidance for next year and the absence of questions and answers during the conference call have left some analysts frustrated and skeptical following the company’s fourth-quarter earnings results.

On Wednesday, the stock fell 18% during the morning session, hovering around $ 150 per share.

The company “is usually more available after the conference call, at least to give a little more color to what they’re thinking and what the trends might be. I didn’t get any of that from them. So it’s really been. quite frustrating, “Joe Feldman of Telsey Advisory Group told Yahoo Finance.

“I think of all the investors in the stocks, they were probably quite upset that there really wasn’t a lot of new information to come out yesterday,” Feldman added.

On Tuesday, the company announced that former Amazon and Google tech veteran Jenna Owens will be the next COO, yet another change since Chewy (CHWY) co-founder Ryan Cohen joined the board in January. .

However, the BofA global research team notes that “very few details about a plan were given on the GME 4Q call”, without a question and answer session during the 22-minute conference. The company also said it continues to suspend targeting at this time.

“GME provided very little detail on the recovery plans and we remain skeptical of efforts to offset continued digital pressure,” says the BofA note, “Given continued highly challenged results for GME, a change is needed soon.”

BofA analysts reiterated an underperforming rating with a price target of $ 10.

“We remain highly skeptical of GME’s efforts to address its long-standing digital disintermediation problem and the fact that its core market for new and used physical console games is shrinking at a rapid rate,” it read. in the analyst’s note.

Here are the fourth quarter results versus Wall Street analyst consensus estimates, according to Bloomberg data:

Income: $ 2.12 billion vs. $ 2.21 billion expected

Adjusted income: $ 1.34 per share vs. $ 1.43 estimate

Sales comp: + 6.5% vs + 8.1% estimated

Global e-commerce sales (included in comparable store sales) increased 175% and represented 34% of net sales in the fourth quarter of fiscal 2020 compared to 12% of net sales in the fourth quarter of the year fiscal 2019.

“As we look to the future, we are excited about the opportunities before us as we begin to prioritize long-term e-commerce and digital initiatives as we continue to run our core business during this emerging console cycle,” stated the CEO. George Sherman. .

Ahead of the earnings, GameStop announced that its director of customer service, Frank Hamlin, will step down. This marks another major move by the C-suite since Chewy (CHWY) co-founder and activist investor Ryan Cohen joined the board of directors in January.

A pivot to digital and technology is what the future looks like for the struggling video game marketer, with major announcements in recent months serving as catalysts for rising stock prices and increased speculation from retail investors. from companies like Reddit’s WallStreetBets.

In early February, the company announced that Matt Francis, a former engineering lead for Amazon Web Services, would be joining as its first CTO. GameStop also announced that its chief financial officer Jim Bell was resigning, news that more than doubled the stock at the time.

Wall Street analysts have noted that the video game retailer’s shares have traded regardless of fundamentals. The stock currently has no analyst buy, 4 holds and 3 sales ratings, according to Bloomberg data.

GameStop was the target of a massive contraction by retail investors in January, when stocks hit an intraday high of $ 483 on January 28. Since then, stocks have been on a volatile ride, but they are still up more than 870% so far this year on Tuesday morning. hovering around $ 185 / share.

Although there was no mention of GameStop’s recent frenzy and small stock compression during the earnings call, in its 10K filing with the SEC, the company said it is considering selling common stock “primarily to fund the acceleration of our future initiatives. transformation “.

Ines covers the US stock market. Follow her on Twitter at @ines_ferre

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