The GameStop stock in free fall "while business goes bad"

Is the game over for GameStop?

Shares of the world's largest video game retailer rose more than 37 percent on Wednesday after another quarterly earnings report.

<p class = "web-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "The Grapevine-based retailer in Texas reported a 13, 3% decrease in & nbsp;first quarter business figure& nbsp; and a 10.3% drop in sales, with consumers buying more downloadable games than in-store physical versions. The turnover for the year 2019 should also drop from 5% to 10%. "Data-reactid =" 17 "> The Grapevine, Texas-based retailer reported a 13.3% drop in sales in the first quarter and a 10.3% decline in sales in the first quarter. as consumers buy more downloadable games than physical versions in the stores, it also expects a drop in sales for the year 2019 from 5% to 10%.

<p class = "web-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "New hardware sales have dropped 35% over in the quarter, players wait for new consoles to hit the market of & nbsp;Sony& nbsp; and & nbsp;Microsoft. "Data-reactid =" 18 "> Sales of new equipment dropped 35% in the quarter as players wait for new Sony and Microsoft consoles in the market.

The lack of launch of new titles in the first quarter resulted in a 4.3% decline in sales of new software games, while the sales of second-hand games dropped 20.3%.

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Sales of accessories (+ 0.6%) and collectibles (+ 10.5%) were the only positive points.

Investors were surprised to learn that GameStop was immediately eliminating its quarterly dividend, sign that the company had no money to spend. This measure should save the retailer $ 157 million a year.

The knell of GameStop

The reaction of Wall Street analysts has been quick and painful.

The benchmark analyst, Mike Hickey, lowered his stock price target from $ 9 to $ 5 "as business goes to the ground," he said. written in a note to customers. He believes that GameStop is a "sale".

It seems that Wall Street is already losing patience with the new direction of GameStop. CEO George Sherman joined the company in April and promised to conduct a "thorough" review of the company and run it "deliberately and with urgency".

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But after the company's last earnings call, analysts do not need it anymore.

"The latest version of GME's management team was uninteresting and did not present any consistent articulation of a tangible vision on how to transform the business, in our opinion," wrote Hickey. "Despite a" nuanced "valuation and an annual savings of $ 157 million realized by the split group, GME has not had the guts to buy back shares as management seems focused on the business." short-term business learning. "

Credit Suisse analyst Seth Sigman has reduced its price target to $ 7.50 from $ 7 to $ 6.50. He attributes this action "outperformance".

"The new management has presented some initial plans to improve the results, which makes sense on paper, but the timing and any necessary reinvestments remain unknown at a time when the company is also facing external factors. [including] a declining cycle, increasing digital penetration and persistent weakness of used vehicles, "Sigman wrote to customers.

Change the game habits

GameStop, which operates more than 5,800 stores in 14 countries, has been under pressure in recent years as consumers move from buying physical video games to downloading and streaming.

GameStop also has a big competition to do behind the scenes. Apple's Arcade game service is scheduled to launch this fall, and Alphabet is expected to announce June 6 as the release date of its cloud-based game service, Stadia.

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