GameStop earnings preview: Do investors want more than retro stores and cash hoarding?

GameStop Corp. (NYSE:GME) will report Q2 earnings after the market closes on September 10. The consensus estimates are for the retailer to disclose revenue of $895.7 million and EPS of -$0.09. GameStop (GME) has reported an EPS loss in eight of the last ten quarters.

Wedbush Securities expects GameStop (GME) to report an in-line quarter with a modest sequential improvement on the bottom line, driven by increased interest income. Looking ahead, the Texas-based company is seen continuing to face a near insurmountable barrier to its planned return to growth. Analyst Michael Pachter pointed to the ongoing shift of game sales from physical to digital, a decline in game sales as microtransactions proliferate, the growth of subscription services, and an ongoing hardware sales decline as major headwinds.

There is also the question of what the master plan is at GameStop (GME), as the company has not given any clear indication of a new strategy that would involve the billions in cash it is sitting on. In an interesting twist last month, GameStop (GME) announced the opening or restyling of several “retro” locations that sell old consoles and hardware, as well as software discs. The retailer’s retro website includes games for NES, SNES, Game Boy, Game Boy Advance, N64, DS, GameCube, Wii, Wii U, PS1, PS2, PS3, PS Vita, Xbox, Xbox 360, Sega Dreamcast, Sega Saturn, and Sega Genesis. On the financial front, GameStop Corp. (GME) recently disclosed that the company voluntarily terminated its credit facility, including all commitments and obligations under the credit agreement. The termination was effective as of August 27. As a result, the company’s principal sources of liquidity will be cash from operations and cash on hand.

Once again, GameStop (GME) does not have an earnings conference call scheduled.

GameStop (GME) is thinly covered on Wall Street and Seeking Alpha, but analysts are generally bearish. The Seeking Alpha Quant Rating on GME is flashing Hold.

Shares of GameStop (GME) are up 13% over the last six weeks. Options trading currently implies a 16% move after the new earnings report is dropped. Short interest on GME stands at 8.4% of the total float.