GameStop Q4 Earnings Preview: All Eyes On Profits, Ryan Cohen's Stock Trades With Company's Cash

Video game retailer GameStop corporation GME is set to report fourth-quarter financial results after market close Tuesday, March 26.

Here's a look at the earnings estimates, what analysts are saying and key items to watch.

Earnings Estimates: Analysts expect GameStop to report revenue of $2.05 billion in the fourth quarter, according to data from Benzinga Pro.

The company reported revenue of $2.23 billion in last year's fourth quarter.

GameStop has beaten revenue estimates from analysts in two of the last four quarters, but only two of the last six quarters.

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Analysts expect GameStop to report earnings per share of 29 cents for the fourth quarter, compared to a profit of 16 cents per share in the prior year's fourth quarter.

GameStop reported a loss of 14 cents pre share in the first quarter, a loss of 3 cents per share in the second quarter and breakeven earnings per share in the third quarter. With a report of 29 cents per share in the fourth quarter, GameStop would have profitability for the full fiscal year.

The company has beaten earnings per share estimates from analysts in three of the last four quarters.

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What Analysts Are Saying: There isn't a lot of coverage by analysts on GameStop stock.

Wedbush analyst Michael Pachter reiterated an Underperform rating and $6 price target in December, which came after the company's third quarter financial results.

The analyst said GameStop saw weakness in software in the third quarter and had an outperformance in hardware.

Pachter was also critical on a new development from GameStop, which could see a change in how the company uses its cash.

Key Items to Watch: One of the most important details for analysts and investors in the fourth quarter report will be the new development Pachter was critical on previously.

GameStop shared in a filing that it will allow CEO Ryan Cohen to invest the company's cash. The company said it has traditionally invested its "excess cash" in short-term fixed income securities.

"On December 5, 2023, the Board of Directors approved a new investment policy that permits the Company to invest in equity securities, among other investments," GameStop said.

The company also stated that Cohen will oversee its investment operations in both public and private sectors, potentially targeting the same companies in which he has personal investments.

Pachter was critical of the announcement and potential.

"GameStop's Board makes the most inane decision we have ever seen," Pachter said.

Pachter said GameStop should buy back company stock instead of the new investment strategy. The analyst said that GameStop previously issued 30 million shares at $50 and now thinks the stock is too expensive to buy back at $15.

"The board clearly believes GameStop stock is a lower return investment than other market opportunities. That is the definition of ‘underperform,' so I'm happy to see that they agree with me," Pachter tweeted.

Investors will be looking at filings to see if GameStop invested the company cash in any stocks or private companies.

Analysts and investors will also be looking to hear about future growth opportunities. The company ended its NFT platform in recent months and could see continued weakness with a shift to digital sales of video games. Investors will be looking for future catalysts alongside profitability and a strong balance sheet.

The video game retailer has not held a conference call for several quarters and a call with investors and analysts on Tuesday could mark a change of pace.

GME Price Action: GameStop shares are up 12.7% to $14.77 on Monday versus a 52-week trading range of $11.82 to $27.65. Shares of GameStop are down 42% over the last year.

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