Anders Bylund, The Motley Fool
5 min read
In This Article:
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GameStop's profits have improved, but sales continue to decline.
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The company is shifting its focus to collectibles and used gaming hardware.
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This stock looks very speculative right now.
Video game retailer GameStop (NYSE: GME) used to be hot stuff. The company nearly went out of business during the lockdowns of 2020, but the stock caught a second wind in 2021. Driven by social media hype and a new leadership team, GameStop's stock soared to nearly $87 per share. That's up from $3.36 three months earlier, creating a price spike of a cool 1,000%.
But the surge didn't last, and GameStop's stock has been trending lower ever since. As of June 13, investors have taken a 74% haircut from the very top in January 2021.
Are you watching the beginning of the end for GameStop's retail empire, or is the stock poised for another dramatic recovery in 2025? Let's find out.
Let's stop looking at the stock charts and break out GameStop's financial reports instead. How is the company doing in the video game and collectibles markets nowadays?
GameStop's profits have been hit or miss in recent years. The company is currently enjoying an upswing, with positive free cash flows and adjusted earnings over the last four quarters.
At the same time, GameStop's top-line sales have been swooning for a decade now. The company was struggling to produce sales growth and higher store traffic before the coronavirus pandemic swept in. Here's what the revenue chart looks like over the last three years:
Taken together, the plunging sales and rising profits must mean that the company is doing something right. I see higher profit margins in these charts, despite the onslaught of games being sold as downloads or streaming services in recent years.
Unfortunately, it's difficult to say what's actually working for GameStop. The company has been publishing bare-bones earnings reports for years, containing the bare minimum of required financial data and no management commentary to speak of. CEO Ryan Cohen and his team stopped holding earnings calls in 2023. And the newsroom is full of financial restructuring notices, including several debt refinancing moves and the purchase of 4,710 Bitcoin (CRYPTO: BTC).
A closer review also reveals two cash-raising stock sales in 2024. The company is also looking to sell its French operations and has sold its Canadian operations. The latest earnings report noted that the Canadian transaction was complete. This segment accounted for 7% of GameStop's total sales in the first quarter of fiscal year 2026, but all of GameStop's international operations are running at a loss.
