GameStop Corp. is an American consumer electronics and gaming merchandise retailer headquartered in Grapevine, Texas. It has over 1,600 percent growth over the past month, despite having lost money in three of its four prior quarters. The company has since shifted its focus online, acquiring ThinkGeek, Kongregate, and Simply Mac. Its stock has since doubled in a short time. While many investors are skeptical, the company’s recent moves show why it has performed so well.
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Shares of GameStop are up over 1,600 percent in one month
Shares of game retailer GameStop (GME) surged by over 1,600 percent in a single month as retail investors piled in, and hedge funds covered their short positions. The surge was fueled by large retail inflows and a “short squeeze,” when hedge funds were forced to unwind their bets and buy shares of an unpopular stock. GameStop’s success prompted the Securities and Exchange Commission to request documents and information about the stock’s trading.
The recent surge in GameStop stock is fueled in part by a psychological factor that many investors are taking advantage of. Fear of missing out is one such psychological factor, which makes investors wait for the perfect time to jump in. But GameStop stock is still heavily shorted, with a total of 8.6 million shares shorted as of November 2021. Nonetheless, smaller investors are also encouraging each other to buy the stock to maintain its momentum.
The company has a net loss in three of the previous four quarters
Gamestop Corp. reported a net loss in its fourth quarter. The company has been absorbing high costs from supply constraints, and has increased spending to shift toward e-commerce. This news has put the company on the defensive as shares have fallen by 7% in extended trading. A supply chain issue and the Omicron variant of the monopoly stock have also contributed to the decline.
GameStop’s fourth-quarter and full-year results surprised investors with their deeper losses than expected. The company reported a net loss of $141 million for the quarter, compared with a profit of $81.4 million in the fourth quarter of the previous year. Despite the disappointing results, GameStop reported that its sales were up 6% year-over-year and exceeded Wall Street expectations. The company’s balance sheet showed $771 million of cash on hand, with little debt.
It is pivoting online
The company is closing hundreds of stores in 2020, and plans to close another 120 in early 2021. It plans to sell 5 million shares in a stock offering to find additional investors, and is pivoting rapidly to the online world. It has a long history in physical retail, and thousands of locations around the world. However, the recent “Pandemic” phenomenon has only made the situation worse. This is a good sign that the company is pivoting online to remain competitive, but it must be done in the context of the broader challenges in retail.
In the last five years, GameStop has been in a downward spiral, and its new board includes Chewy founder Ryan Cohen. Despite the company’s troubles, it’s evident that Cohen’s new strategy is working. Online sales rose 25% in Q1 2019, to a record $1.3 billion. However, the company is closing 12 percent of its brick-and-mortar stores. Its new leadership, however, is trying to change that.
It has acquired ThinkGeek, Kongregate, and Simply Mac
Known for its high-quality video games, GameStop is also expanding into other categories with the acquisition of ThinkGeek, Kongregate, and simply Mac. In addition to its video games, the company has a large selection of collectibles, such as Star Wars and Marvel comics. With its growing brand recognition, GameStop has also become a leader in video games.
The company has been growing and acquiring companies to expand its product offerings, and has recently announced plans to add more tech stores, including a dedicated Apple store and a gaming cafe. It has also acquired EB Games and Babbage’s, and will expand its online retail business by opening stores focused on Apple gear and AT&T mobility products. But the latest move is one that will continue to shake up the gaming industry.
