A Sales Slump Is the Kiss of Death for GameStop Stock


  • GameStop (GME) posted subpar quarterly financial results.
  • GameStop disclosed that it had eliminated an unspecified number of jobs.
  • Investors shouldn’t touch GameStop stock with a 10-foot pole.
GameStop stock - A Sales Slump Is the Kiss of Death for GameStop Stock

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Back when interest rates were low and speculative fervor ran high, video-game retailer GameStop (NYSE:GME) was a darling among meme-stock traders. Those days are gone, however, and the hope of a full recovery for GameStop stock is fading fast. Frankly, it’s “game over” for GameStop’s investors in 2024.

GameStop is a relic from the era of physical console games. Video game enthusiasts now usually buy digital game downloads or streams. GameStop could face the same fate as Blockbuster Video. I encourage you to invest your capital in a more promising business.

Why Did GameStop Stock Drop 15% in a Single Day?

GameStop stock dropped 15% on March 27, and that didn’t just happen by chance. The previous day, GameStop published its fourth-quarter 2023 financial results, but we’ll get to that topic in a moment.

Along with that, GameStop disclosed that the company had recently eliminated a number of jobs, an unspecified number of jobs, actually. It’s probably not a good sign that GameStop opted not to reveal how deep the jobs cuts were.

Along with fewer employment roles, GameStop also has fewer store locations. GameStop had 4,413 stores in January 2023, but that number dwindled to 4,169 stores as of Feb. 3, 2024.

It looks like GameStop, once the meme king, is shrinking. The company’s sales are shrinking, too, so let’s delve into the unfortunate details right now.

GameStop’s Revenues Aren’t Likely to Rebound

As I explained earlier, GameStop is having problems because today’s gamers typically download their games digitally. Wedbush Securities analyst Michael Pachter succinctly summarized the issue.

“An increasing mix of digital downloads is hurting physical retail, and there is simply no reason to go to the store if a consumer can just order a game and download it immediately,” Pachter wrote.

Consequently, GameStop’s net sales declined from $2.226 billion in 2022’s fourth quarter to $1.794 billion in the fourth quarter of 2023. Pachter seems pessimistic, as he believes that GameStop’s revenues “are highly unlikely to rebound unless management figures out a way to drive store traffic.”

Analysts expected GameStop to report Q4 2023 net sales of $2.05 billion. Thus, GameStop missed Wall Street’s consensus forecast. The company also missed on the bottom line, as analysts predicted GameStop would post adjusted earnings of 30 cents per share; the actual result turned out to be 22 cents per share.

GameStop Stock: Forget About This Former Meme King

The bottom line is, don’t expect GME stock to stage a miraculous full recovery. The company sells products that aren’t popular with gamers in 2024, and GameStop isn’t the meme king anymore.

Investing in GameStop now is like trying to rewind the clock or turn back the calendar. Look toward the future of gaming and not the past. If you value your wealth, just stay away from GameStop stock.

On the date of publication, David Moadel did not have (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.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.

Article printed from InvestorPlace Media, https://investorplace.com/2024/04/a-sales-slump-is-the-kiss-of-death-for-gamestop-stock/.

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