Specialty retailer GameStop Corp. (GME) is a game and entertainment products provider operating through its various stores and e-commerce properties. The company sells new and pre-owned gaming platforms, accessories, new and pre-owned gaming software, and in-game digital currency.
On July 11, GME announced the launch of its non-fungible token (NFT) marketplace to enable gamers, creators, collectors, and other community members to buy, sell and trade NFTs. The non-custodial, Ethereum Layer 2-based marketplace is expected to expand functionally over time.
The stock has declined 39.6% over the past year and 16.6% year-to-date to close its last trading session at $30.94. It has declined 10.2% over the past five days.
Here are the factors that could affect GME’s performance in the near term:
Bleak Financial Growth
For the fiscal first quarter that ended April 30, GME’s net sales increased 8% year-over-year to $1.38 billion. However, gross profit decreased 9.6% from the prior-year quarter to $298.50 million. Adjusted net loss and adjusted loss per share rose 437.1% and 362.2% from the same period the prior year to $157.90 million and $2.08.
Stretched Valuations
In terms of its forward EV/Sales, GME is trading at 1.39x, 21.5% higher than the industry average of 1.14x. The stock’s forward Price/Sales multiple of 1.45 is 59.1% higher than the industry average of 0.91.
Negative Profit Margins
GME’s trailing-12-month gross profit margin of 21.53% is 41% lower than the industry average of 36.49%. Its trailing-12-month net income margin and levered FCF margin of a negative 7.73% and 9.37% are significantly lower than their respective industry averages of 5.99% and 2.04%.
The stock’s trailing-12-month ROE, ROTC, and ROA of negative 40.55%, 14.31%, and 15.11% compare with the industry averages of 15.38%, 6.91%, and 5.23%.
Unfavorable Bottom-line Growth Expectations
The consensus EPS estimates of a negative $0.38 and $0.37 for the quarters ending July and October…
