GameStop Faces Limited Runway as Revenue Declines, Analyst Warns

Wedbush's Michael Pachter lowered their price target on Gamestop (NYSE: GME) by 6.7% from $6 to $5.6 on 2024/03/27. The analyst maintained their Sell rating on the stock.

In a note reviewing Gamestop's fourth quarter 2023 print, released on March 26, Pachter highlighted several factors contributing to the company's large sales decline. These include a mix shift in software sales, declining hardware sales, fewer large console releases, and the growth of subscription services. Despite these challenges, Pachter noted that Gamestop's cash burn and losses "appear to be manageable going forward." He added that the company has the ability to weather $100 million of annual losses for a decade or more, given its current cash balance.

However, Pachter also cautioned that GameStop has a limited runway of no more than five years due to its revenue declines. He stated that the company "will collapse at some point later this decade."

GameStop reported EPS of $0.22 for the fourth quarter of 2023, which missed the Zacks Consensus Estimate of $0.25 but beat the previous year's fourth quarter EPS of $0.16 by 37.5%. The company's revenue for the same period was $1.79 billion, missing the Zacks Consensus Estimate of $2 billion and showing a 19.7% decline compared to the fourth quarter of 2022.

For the fiscal year 2023, GameStop reported EPS of $0.06, which surpassed the previous year's EPS of $(1.02) by 105%. However, the company's revenue for the fiscal year was $5.27 billion, missing the previous year's revenue of $5.93 billion by 11%.

It is worth noting that GameStop's management did not provide guidance or commentary on the results and has not yet hosted an earnings call.

In addition to their analysis of GameStop, the Wedbush analyst also raised their price target on Netflix Inc by 17.9%, from $615 to $725, while maintaining their Buy rating.

Looking at analyst ratings for GameStop, none of the top-rated analysts currently consider it a Strong Buy or Buy. There are no analysts who see it as a Hold, and 100% either recommend or strongly recommend selling the stock.

Since GameStop's latest quarterly report on March 26, the stock price has declined by 15%. Year-over-year, the stock is down 42.7%. During the same period, GameStop has been trailing the S&P 500, which is down 32%.

Wedbush analyst Michael Pachter, known for specializing in the Communication Services, Consumer Cyclical, and Technology sectors, is ranked in the top 8% out of 4,527 Wall Street analysts by WallStreetZen. Pachter has an average return of 8.3% and a win rate of 54.7%.

GameStop Corp. is a video game, consumer electronics, and gaming merchandise retailer. The company operates stores in the U.S. and internationally under various brands, including GameStop, EB Games, EB Games Australia, Micromania-Zing, ThinkGeek, and Zing Pop Culture. GameStop also publishes Game Informer, a video game magazine. Originally known as Babbage's until 1999, GameStop was founded in 1984 and is headquartered in Grapevine, TX.

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