GameStop Q3 Earnings Preview: Street looks for signs of stabilization amid declining revenue

Gaming retailer GameStop (NYSE:GME) is scheduled to announce its third quarter earnings results on Tuesday, December 10th, after the closing bell. Investors will look for signs of stabilization amid profitability challenges and declining revenue.

Wall Street expects the company to report a loss of $0.03 per share, on a revenue of $887.68M, a 17.8% decline from last year.

GameStop (GME), also known as a ‘meme stock’, saw a frenzy of activity in its shares in 2021, after stock influencer Keith Gill, also known as Roaring Kitty, influenced an army of online investors to back the struggling company.

Since then, the company’s shares have seen volatile trading activity, popping more than 10% last week, on a cryptic tweet from Gill. However, Wedbush analyst Michael Pachter believes that the trend is not here to stay.

“I don’t think Roaring Kitty has any edge in GameStop, and his last big proclamation was ‘I believe in management,'” said Pachter. “They’ve done nothing since, and the enthusiasm is definitely more muted than the last time.”

Seeking Alpha analyst Howard Jay Klein echoes Pachter’s view and says that GameStop’s stock is driven by speculative frenzy rather than fundamental business performance or earnings results.

“GME’s situation mirrors historical speculative bubbles, where crowd madness drives prices up without substantial changes in underlying value,” the analyst added.

The company does not have a good track record when it comes to beating analysts’ earnings estimates. Over the last two years, GameStop has beaten EPS estimates 50% of the time, and revenue estimates only 25% of the time.

The company’s revenue fell 31.2% year-over-year in the second quarter to $798.3 million. The Texas-based company said selling, general and administrative expenses were 33.7% of sales, compared to 27.8% of sales a year ago.

GameStop (GME) has gained more than 63% in market value so far this year, outperforming the 27% rise in the broader S&P 500 Index.