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GameStop stock analysis. Ticker: $GME
GameStop soared 500% last month after Keith Gil, also known as Roaring Kitty, reappeared on social media after a 3 year absence. Things got even crazier when Kitty revealed a huge position in the stock worth over $200 million dollars, then scheduled a YouTube live stream.
Anticipation for the stream sent the stock even higher and at one point Kitty’s position looked set to hit a billion dollars. But momentum cratered after Gamestop management released a surprise earnings report before the market open and a 75 million stock offering. Kitty’s live stream then started 20 minutes late and was unable to support the stock amid multiple trading halts. By the end of Friday, shares had crashed 40% in value.
Accounting for recent stock offerings, GameStop now looks to be worth about 9.9 billion with a cash balance of 1.9 billion. And that cash balance will increase further as the company attempts to sell another 75 million shares. Of course, those sales will also dilute shareholders and put pressure on the stock price.
Meanwhile, GameStop’s latest earnings report wasn’t good. Revenue in the quarter declined by a huge 29% taking the twelve month figure under 5 billion. The company has cut costs but free cash flow is still in the red. GameStop’s brick and mortar business model simply doesn’t work without revenue growth.
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