Translate to English: Turnaround in performance with a profit! Why did GameStop
In 2021, under the impetus and leadership of the "big brother" Keith Gill, American retail investors banded together to defeat Wall Street short sellers on the stock of GameStop (GME.US), even forcing the well-known short-selling firm Citron to leave the scene in disappointment. As a result, GameStop also earned the title of "retail investor concentration camp."
On May 13th of this year (local time), the long-silent "big brother" made a comeback, posting a meaningful picture on X, which showed a person leaning forward and becoming serious while playing a game.
Stimulated by this news, GameStop's stock price climbed to a historical peak of $64.83 on May 14th. However, GameStop's own performance is not particularly impressive, and after the enthusiasm of the funds faded, it suffered a significant drop. After falling by 3.30% on September 10th (local time), its stock price is now only $23.45.
On September 10th (local time), after the market closed, GameStop's stock plummeted by 10.45%, which may be due to the company's latest disclosed financial results.
The financial report shows that in the second fiscal quarter of the fiscal year 2025, GameStop's revenue decreased by 31% year-on-year to $798 million, which is weaker than market expectations.
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Looking at the business side, the revenue from hardware and accessories (new and used hardware, accessories, hardware bundles, interactive game figurines, strategy guides, mobile and consumer electronics) decreased by 25% year-on-year to $451 million; the revenue from the software division (new and used video game software, digital software, and computer entertainment software) plummeted by 48% year-on-year to $208 million; the revenue from collectibles also decreased by 18.1% year-on-year to $139 million.
It is evident that in the second fiscal quarter, all three business segments of GameStop experienced a decline, and the situation is quite severe.
However, while revenue has decreased significantly, GameStop's costs, operating expenses, and sales and administrative expenses are also declining in tandem, and the company has achieved $39.5 million in interest income in the second fiscal quarter.
As a result, in the second fiscal quarter, despite the decline in revenue, GameStop actually turned a profit compared to the same period last year, with a net profit of $14.8 million; earnings per share were $0.01, which is better than market expectations.It is worth mentioning that the substantial interest income achieved in the second fiscal quarter is largely attributed to the abundant cash flow on GameStop's books. Data indicates that, as of the end of the second fiscal quarter, GameStop's cash, cash equivalents, and marketable securities amounted to a staggering $4.204 billion.
The ample cash reserves that GameStop possesses are, to a significant extent, due to the company's substantial fundraising through the issuance of shares in June of this year, which effectively bolstered its cash reserves.
Overall, although GameStop managed to turn a profit in the second fiscal quarter compared to the same period last year, this was primarily due to the substantial funds raised during periods of high stock prices. In reality, the company's core business is far from ideal, with a general decline across the board.
Of course, having sufficient cash reserves is beneficial for future business development, but the uncertainties involved are too high, and this alone is clearly insufficient to convince the market.
Additionally, GameStop has not held an earnings call or provided financial guidance for several quarters, which is also unfriendly to U.S. stock investors.
In summary, it is not surprising that GameStop's stock price plummeted after hours. However, as a "retail investor stronghold," its stock price is highly susceptible to speculative trading, which is something to keep an eye on.
