GameStop (NYSE: GME) shares finished 3.5% higher following the company's Q4 earnings report. Shares initially opened about 5% lower due to the company's big miss on the bottom-line. However, shares rallied on the company's announcement that it would be launching its own NFT marketplace in the coming months.
The video game retailer was also affected by supply chain issues and is spending heavily to improve its online experience, augment its e-commerce capabilities, and increase the value of its rewards program. Despite these efforts, the company is still not even close to realizing investors' optimism at the start of 2021 when the stock made its incredible move higher.
Gamestop is down by 81% from its peak in 2021 at $483, however, it still remains 3,200% higher from its March 2020 low. The company is in a better financial position due to raising cash from its lofty stock price but is not meaningfully improved from an operating perspective.
Inside the Numbers
In Q4, GameStop reported $2.25 billion in revenue, which beat analysts' estimates of $1.95 billion. Earnings per share came in at -$1.86 per share while analysts were looking for $0.84 in earnings per share.
The biggest factor in the company's miss was a surprise deceleration in video game console sales, reflecting that a significant portion of demand was pulled forward during the pandemic. Sales were also hurt by less availability of consoles due to chip shortages.
The company is also spending on various initiatives including promoting its PowerUp Rewards Pro membership which now has 5.8 million members, a 32% annual increase.
The company is finally moving closer to the launch of its NFT marketplace with a partnership with Immutable X, however, the hype for NFTs may have passed as interest and volume drops for digital assets.
In the quarter, Gamestop lost $150 million. Unlike 2 years ago, there is no bankruptcy risk as the company has $1.2 billion in cash and $1 billion in inventory.
Currently, Gamestop is worth $6.7 billion, and it lost $380 million over the last 12 months. It's possible that the same trends which negatively impacted Gamestop and put it on the verge of bankruptcy in the pre-pandemic era - lower foot traffic and rising costs - could once again rear their heads if the company can't successfully execute a turnaround.