![]() “In other words, we do not think equity investors will ever see $1 of economic earnings, which means the stock is worth $0 today,” he added. “Not surprisingly, GME has an economic book value, or no growth value, of -$19/share.” “It is unlikely that the company will ever make enough money to satisfy stakeholders with higher claims on the company’s cash flows than common equity shareholders,” he said. ![]() Set against this backdrop, Trainer isn’t confident of GameStop’s chances of exiting the list of zombie stocks. “GameStop’s net operating profit after-tax (NOPAT) margin and return on invested capital (ROIC) are worse than during GameStop’s fiscal 2021, which occurred largely during the COVID lockdowns of 2020,” he said. New Constructs’ Trainer cites GameStop’s “ongoing lack of profitability” as a major problem. See Now: ‘Zombie’ stocks AMC and GameStop could feel the cash burn, says New Constructs The retailer’s recent results also marked GameStop’s sixth consecutive quarterly loss. ![]() In its second quarter, GameStop reported quarterly sales of $1.136 billion, down from $1.183 billion in the prior year’s quarter and below the FactSet consensus of $1.266 billion. The company also said it ended the quarter with no debt other than a low-interest loan related to the French government’s response to the pandemic. GameStop ended its most recent quarter with cash and equivalents of $908.9 million. “Raising additional capital to fund a business that has failed to improve profitability over the past four years and faces heavy competition in the retail/ecommerce market would likely be very expensive, if not impossible.” “GameStop’s cash balance could only sustain its cash burn for another 18 months after fiscal 1Q23, assuming cash burn is similar to the TTM,” he said. There is also limited cash available, according to Trainer. “ They (meme investors) are definitely the same kind of dynamic you see in a cult.’ ” - George Pearkes, analyst, Bespoke Investment Group New Constructs first highlighted the risk posed by GameStop in a report in April 2021, he told MarketWatch. The research firm, which uses machine learning and natural language processing to parse corporate filings and model economic earnings, has been bearish on GameStop for much longer, according to New Constructs CEO David Trainer. Independent equity research firm New Constructs added GameStop to its list of “ zombie stocks” in August. GameStop is clearly still capable of generating buzz, but what is the reality behind all the noise? 29, 2022, GameStop had 3,018 stores in the U.S., according to an SEC filing, down from 3,192 a year earlier. See Now: GameStop stock jumps 12% after retailer’s narrower quarterly loss, crypto dealĪs of Jan. GameStop’s market cap is now around $8.6 billion. Between January and March 2021, GameStop’s stock price rose more than 1,200% and the company’s market cap surpassed $17 billion. GameStop, like AMC, was a major beneficiary of the meme stock buying frenzy in January 2021, sending the struggling company’s stock skyrocketing to dizzying heights. ![]() Earlier this year GameStop rocketed to its longest win streak in over a decade, boosted in part by a bullish post on the WallStreetBets subreddit. Has declined 17.9% and 2.3%, respectively over the same periods. GameStop shares, which have fallen 24 % this year, have risen 9% in the last five days.
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