Is It Time to Give Up on GameStop (GME) Stock?

  • Video game retailer GameStop (GME) is trending on social media after the company reported weaker-than-expected third-quarter results yesterday.
  • The company is carrying out layoffs.
  • Famed billionaire investor Carl Icahn has profited by shorting GME stock.
GME stock - Is It Time to Give Up on GameStop (GME) Stock?

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GameStop (NYSE:GME) stock is trending on social media after the video game retailer reported that its revenue had sunk 8.5% year-over-year amid muted video game sales. GME noted, however, that it had made significant progress in reducing its costs.

GameStop’s Q3 Results

GME’s third-quarter loss, excluding some items, came in at 31 cents per share, meaningfully worse than analysts’ average estimate of a per-share loss of 28 cents. Its revenue dropped 8.5% year-over-year to $1.19 billion, versus the mean estimate of $1.345 billion. GME’s software revenue sank 19% year-over-year (YOY).

On a positive note, its collectibles sales increased 8% YOY. Additionally, GameStop’s sales, general, and administrative spending fell to 32.7% of its revenue from 34.1% in Q2.

However, after the retailer unveiled its results, Michael Pachter, an analyst at investment bank Wedbush, indicated that he does not expect the company to become profitable anytime soon.

Layoffs, Crypto, and Icahn’s Bet Against GME Stock

GameStop’s CEO, Matt Furlong, reported that the company had reduced the size of its workforce in the second half of this year. “At least six software engineers” recently reported that they had been laid off by the retailer.

As of September, GameStop had an alliance with failed crypto exchange FTX. The partnership was supposed to enable FTX’s customers to buy GME’s digital assets. But speaking on GameStop’s earnings call yesterday, Furlong, said “The Company has proactively minimized exposure to cryptocurrency risk throughout the year and does not currently hold a material balance of any token.”

At the end of last month, Bloomberg reported that Carl Icahn, a famed billionaire investor, had begun shorting GME stock around the time that it had reached its highest point last year. Icahn realized a profit on the bet and was still shorting GME as of the end of November, Bloomberg added.

On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been PLUG, XOM and solar stocks. You can reach him on Stocktwits at @larryramer.


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