GameStop (NYSE:GME) reported fourth-quarter earnings after the closing bell, and investors are not sure what to make of the news. An earnings miss and a stock sale hit GME stock hard, but infamous Redditor Roaring Kitty is not giving up. Does this mean r/WallStreetBets can help salvage GameStop and get the company back into moon orbit?
Driving the news is the fact that GameStop reported fourth-quarter earnings and full-year results for fiscal 2020 this afternoon. This was the first quarterly confessional for the video game retailer since its powerful short-squeeze rally, and investors were eager for meaningful corporate updates.
So what did we learn from the GME stock earnings report?
Revenue came in at $2.122 billion, down slightly from $2.194 billion in Q4 2019. According to GameStop, this drop is the result of fewer retail outlets (as the company reins in its footprint) and fewer operating days at European locations (thanks to Covid-19 lockdowns). Analysts were hoping for quarterly revenue of $2.21 billion. Earnings per share of $1.34 also missed estimates of $1.43.
Also raising concerns is news that GameStop is considering increasing its at-the-market program to sell additional shares of its Class A common stock. It says that this would be a move to leverage current investor interest, and it would give it cash to fund future growth. This is not uncommon, and could be a benefit to GameStop in the long term. However, for current shareholders, it would mean dilution and pressure from any insiders selling common stock.
Here are a few other key numbers:
- Global sales increased 175% year-over-year and represented 34% of total sales.
- Comparable-store sales increased 6.5% during the quarter.
- GameStop says it ended fiscal 2020 with $635 million in total cash.
- Additionally its expense reduction initiatives led to $409 million in improvements in 2020.
Earnings, Roaring Kitty and GME Stock
So with an earnings miss and talk of a stock offering, where does the r/WallStreetBets hope come from? Namely, a new post from famed Roaring Kitty showing that he is still holding his GME stock shares.
GameStop also shared a few key details that should have Redditors excited. First, as part of its C-Suite transformation, the company announced that it appointed Jenna Owens to be chief operating officer. Framed as a tech veteran, Owens comes from executive positions at Amazon (NASDAQ:AMZN), Honeywell (NYSE:HON) and Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL). GameStop also announced that it appointed Neda Pacifico to serve as senior vice president of e-commerce and Ken Suzuki to serve as vice president of supply chains.
With CFO Jim Bell set to leave at the end of this week, GameStop will have further opportunity to bring in tech and e-commerce leaders.
Additionally, the company shed insight into its turnaround strategy. It highlighted initiatives such as expanding its product offerings, revamping its e-commerce, in-sourcing new talent and improving the customer experience. The end goal? Becoming a “customer-obsessed technology company that delights gamers.”
What is the bottom line? Roaring Kitty and the hype of r/WallStreetBets can help GameStop navigate any post-earnings slump. Looking to the future, it seems that GameStop is taking retail investor interest seriously and is eyeing long-term growth. If all goes well, Ryan Cohen really could take shares to $500.
On the date of publication, Sarah Smith did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Sarah Smith is a Web Content Producer with InvestorPlace.com.