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

A lack of details over GameStop’s (GME) turnaround plan, no guidance for the year ahead, and no Q&A during its conference call has left some analysts frustrated and skeptical following the company’s fourth quarter earnings results.

On Wednesday the stock was down about 18% during the morning session, hovering around $150 a share.

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

“I think from all the investors in the stock, they probably have been pretty upset just that there really wasn’t a lot of new information to come out yesterday,” added Feldman.

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

However, BofA’s Global Research team highlights “very little detail on a plan was given on GME 4Q’s call”, with no Q&A session during the 22 minute conference. The company also said it is continuing to suspend guidance at this time.

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

BofA analysts reiterated an Underperform rating with a $10 price objective.

“We continue to be very skeptical on GME’s efforts to address its long standing issue of digital disintermediation and the fact that it’s core market in new and pre-owned physical console gaming is shrinking at a rapid pace,” reads the analyst note.

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

Revenue: $2.12 billion vs $2.21 billion expected

Adjusted earnings: $1.34 per share vs $1.43 estimate

Comp sales: +6.5% vs +8.1% estimate

Global E-Commerce sales (included in comparable store sales) increased 175% and represented 34% of net sales in the fiscal 2020 fourth quarter versus 12% of net sales in the fiscal 2019 fourth quarter.

“As we look ahead, we are excited by the opportunities that are in front of us as we begin prioritizing long-term digital and e-commerce initiatives while continuing to execute on our core business during this emerging console cycle,” stated CEO George Sherman.

Ahead of earnings, GameStop announced its Chief Customer Officer Frank Hamlin will be stepping down. This marks another major C-suite move since activist investor and Chewy (CHWY) co-founder Ryan Cohen joined the board of directors in January.

A pivot to digital and tech is what the future seems to hold for the struggling brick-and-mortar video game seller, with major announcements over the last few months serving as catalysts for the stock’s rising price and increased retail investor speculation from the likes of Reddit’s WallStreetBets.

In early February the company announced Matt Francis, a former engineering leader from Amazon Web Services, would come on board as its first-ever chief technology officer. GameStop also announced its Chief Financial Officer Jim Bell would be resigning — news which sent the stock soaring more than double at the time.

Wall Street analysts have highlighted shares of the video game retailer have been trading detached from fundamentals. Currently the stock has no analyst Buy ratings, 4 Holds, and 3 Sells, according to Bloomberg data.

GameStop was the target of a massive short squeeze by retail investors in January when shares peaked at $483 intraday on January 28. The stock has since been on a volatile ride but still up more than 870% year-to-date as of Tuesday morning, hovering at around $185/a share.

Though there was no mention of the recent GameStop frenzy and short squeeze on the stock during the earnings call, in its 10K SEC filing the company said it is considering selling common stock “primarily to fund the acceleration of our future transformation initiatives.”

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

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