GameStop (NYSE:GME) stock rose briefly overnight after beating estimates with a smaller-than-expected loss. However, it began falling again this morning.
The gaming supplies chain lost $2.8 million, 1 cent per share fully diluted, on sales of $1.164 billion, for the three months ending in July. Last year, during the same quarter, the company lost 36 cents per share. Stronger software sales were credited.
After spending a day digesting the numbers, however, investors decided they were unimpressed. Shares closed the day down 2.5% on Sept. 6. They are due to open Sept. 7 around $18.40, representing a market capitalization of $5.71 billion.
Game Over for GME Stock?
As has become its habit, GameStop did not hold a conference call with analysts to discuss the quarter, which saw the firing of CEO Matt Furlong and the departure of the company’s CFO.
GameStop was the first of 2021’s “meme stocks,” rising to a high of $85 per share as small traders organized on Reddit to battle institutional short sellers. The eventual result was that Ryan Cohen, the Chewy (NASDAQ:CHWY) co-founder who helped lead the charge, took over the company and brought in Furlong.
But Furlong, who formerly worked at Amazon (NASDAQ:AMZN), was unable to juice online sales. Efforts to sell non-fungible tokens (NFTs) also failed, as did GameStop’s efforts in cryptocurrency. The excitement dwindled, and investors are now waiting to see if Cohen has another trick up his sleeve.
Sentiment about the company at Stocktwits is now rated as extremely bearish. Only one analyst follows the company at TipRanks, and he’s telling investors to sell. When one trader on Reddit noted most of the shares are still being held short, there was little reaction to it on the board.
What Happens Next?
Meme trading is fueled by adrenaline, the idea that small investors are sticking it “to the man.” Now that their hero is “the man,” and “the man” seems lacking in ideas, they’re walking away.
From here, look for GameStop to be priced based on fundamentals.
As of this writing, Dana Blankenhorn held a LONG position in AMZN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
