GameStop shares continue to slide as disappointing Q4 results weigh (GME)
GameStop Corp. (NYSE:GME) shares continue to lose altitude on Monday in the wake of last week’s disappointing Q4 results at which time the company reported a 20% drop in revenue while gross profit fell by 16%. With the company expected to face mounting obstacles in raising revenue, Wall Street is bracing for more bad news from the video game retailer.
In conjunction with Q4 results, the company said it would undertake cost-saving initiatives that would include job cuts. Unfortunately, this might not be enough to salvage slowing sales. “As part of our strategic plan to achieve profitability, we have undertaken initiatives to reduce headcount. These initiatives could strain our existing resources, and we could experience operating difficulties in managing our business, including difficulties in hiring, managing, and retaining employees,” the company said in its 10K, adding that if the company does not adapt it may experience “erosion to our brand, the quality of our products and operating results may be negatively impacted.”
“With its current cash balance, GameStop can weather $100 million of annual losses for a decade or more,” Wedbush analyst Michael Pachter said in a research note last week. “However, should its revenues decline by $150-$200 million per year (which is highly likely), it may have trouble trimming costs fast enough to stem the growth of its losses.” Pachter gives GameStop a likely runway of no more than 5 years.
Despite the meteoric rise in the stock during a meme-fueled rally in early 2021, GameStop (GME) shares have surrendered most of the post-2021 gains and on Monday, limped into a new 52-week low of $11.55.
