GameStop Reports 8.5% Drop in Revenue in Q3, with Substantial Adjusted EBITDA Loss; Valuation Remains Difficult to Understand

After the regular market close on December 7, GameStop Corp. (NYSE: GME) reported a second successive quarter in which its revenue declined versus the year-ago period.  The company’s sales in 3Q FY 2023 ended October 29, 2022 were US$1.19 billion, down 8.5% from US$1.3 billion in 3Q FY 2022.  GameStop reported an adjusted diluted EPS loss in 3Q FY23 of US$0.31, a modest improvement from a loss of US$0.35 in the year-ago period.

GameStop’s quarterly sales declined even more than the 5% decline in the overall U.S. video game industry, as measured by The NPG Group, an industry research firm.  This quarter was the first quarter this year that GameStop’s sales change trailed the industry average.

Total Consumer Spending on Video Gaming in the U.S.Video Gaming Industry Year-Over-Year % ChangeGameStop Year-Over-Year % Change in Revenue (A)
3Q 2022$12.34 billion-5%-8.5%
2Q 2022$12.35 billion-13%-4.0%
1Q 2022$13.90 billion-8%8.0%
(A) GameStop’s fiscal quarters are compared to industry calendar quarters and are mismatched by one month.

Sources: The NPD Group and GameStop.

GameStop’s adjusted EBITDA improved marginally in 3Q FY 23 to a loss of US$66.6 million from negative US$78.1 million sequentially, and from negative US$79.8 million in the year-ago quarter.  However, its adjusted EBITDA for the twelve months ended October 29, 2022 remains decidedly negative (US$397 million), as it has been for quite some time.  GameStop last reported a quarter with positive adjusted EBITDA in the period ended January 2021 (positive US$51 million).

As such, GameStop’s valuation continues to be detached from reality.  Its enterprise value is approximately US$6.3 billion despite its continued cash flow deficits.  Equally important, there is no indication this key measure will turn higher, nor does management present any forward estimates of any kind for the company.

GAMESTOP CORP.
3Q FY232Q FY231Q FY234Q FY22
Twelve Months Ended Oct. 29, 2022Oct. 2022Jul. 2022Apr. 2022Jan. 2022
Revenue$5,954.7 $1,186.4 $1,136.0 $1,378.4 $2,253.9 
Adjusted EBITDA($397.1)($66.6)($78.1)($125.5)($126.9)
Adjusted Operating Income($515.6)($95.0)($106.2)($153.7)($160.7)
Adjusted Diluted EPS($1.65)($0.31)($0.35)($0.52)($0.47)
Operating Cash Flow($340.3)$177.3 ($103.4)($303.9)($110.3)
Cash – Period End$1,042.1 $1,042.1 $908.9 $1,035.0 $1,271.4 
Debt – Period End$574.5 $574.5 $602.4 $617.0 $649.0 
Fully Diluted Shares Outstanding (Millions)304.2304.2304.0303.6303.6
Fiscal year 2023 ends January 31, 2023.
(in millions of US dollars, except for shares outstanding)

GameStop did not address any job cuts in its 3Q FY2023 earnings release.  Several media sources reported earlier this week that the company had implemented another round of layoffs, including in its blockchain team (see below).

In May 2022, GameStop announced the launch of cryptocurrency and non-fungible token (NFT) businesses. Furthermore, it established an NFT marketplace where participants could transact.  None of these efforts have gained traction.  The 3Q FY23 10-Q says that “revenues earned from our digital asset wallet and NFT marketplace were not material to the condensed consolidated financial statements for the three and nine months ended October 29, 2022.”  GameStop’s second quarter 10-Q contained the same language, only with a different end date, July 30, 2022.

Back in September 2022, GameStop announced a partnership with FTX US that would introduce GameStop’s customers to FTX’s marketplaces.  GameStop would apparently sell FTX gift cards in some of its stores.  No mention of that initiative was made in its earnings release or current 10-Q.

GameStop is down approximately 74% from it’s high in January 2021.

GameStop continues to look overvalued.  It is now trading at its lowest point, US$22.26, since late May.  It should be noted, however, that the stock bounced fairly aggressively off the US$20 level twice this year, both in mid-March and mid-May. 

GameStop Corp. last traded at US$22.26 on the NYSE.   


Information for this briefing was found via Axios, LinkedIn, and the sources and companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

One Response

Video Articles

Four Countries Control the Fertilizer That Feeds the World | Sage Potash

$10,000 Gold Is Just A Question of Time | Florian Grummes

What Happens If Silver Finally Breaks $50? | Gary Thompson – Silver47

Recommended

Emerita Resources Expands El Cura Drill Program By 10,000 Metres As Deposit Remains Open For Expansion

ESGold Signs MOU For Tailings Project In Colombia With Grades Up To 42 g/t Gold, 280 g/t Silver

Related News

GameStop Announces ATM Financing Capped At $1.0 Billion And 3.5 Million Shares

It may have taken far longer than anyone anticipated, but GameStop Corp (NYSE: GME), whom...

Monday, April 5, 2021, 07:31:22 AM

‘The Wolf of Wall Street’ Jordan Belfort Says Robinhood is ‘Toast’ Following GameStop Fiasco

The sudden decision by Robinhood to halt trading of several highly volatile stocks following the...

Tuesday, February 2, 2021, 03:56:00 PM

Aurora clear winner in Big 5 quarterly results

Three of Canada’s Big 5 cannabis producers have now reported their quarterly earnings this year,...

Tuesday, February 19, 2019, 02:00:30 PM

Gamestop: Squeeze Play On GME or Hedge Fund Kayfabe?

The Alice Cooper Chicken Incident In 1971, Alice Cooper was a touring musician with a...

Thursday, January 28, 2021, 10:03:35 AM

Roaring Kitty Sued for Securities Fraud Over GameStop Stock Manipulation

Keith Gill, better known by his online aliases “Roaring Kitty” and “DeepF***ingValue,” has been sued...

Sunday, June 30, 2024, 09:50:00 PM