GameStop Slides Following Earnings As Possible Share Sale Discussed

Shares of GameStop (GME) are under pressure on Wednesday after the company missed on the top and bottom lines in its first earnings report after the recent Reddit-fueled trading frenzy. The video game retailer also said in a filing that it was considering selling additional equity shares to fund its transformation. Following the news, Wedbush analyst Michael Patcher downgraded GameStop to Underperform, while his peer at Jefferies raised the stock's price target to $175 from $15.


GameStop reported fourth-quarter adjusted earnings per share of $1.34 and revenue of $2.122B, both below consensus of $1.35 and $2.21B, respectively. The company also said fourth-quarter comparable store sales were up 6.5% with global e-commerce sales increasing 175% and representing 34% of net sales in the fiscal 2020 fourth quarter versus 12% of net sales in the fiscal 2019 fourth quarter. GameStop is continuing to suspend guidance amid pandemic.

Additionally, the video game retailer said it is focused on transforming into a customer-obsessed technology company, with the Board and management looking to invest in technology capabilities, build a superior customer experience, expand product offerings, modernize U.S. fulfillment operations to improve speed of delivery and service, establish a U.S.-based customer care operation, and leverage the company's digital assets, including Game Informer and PowerUp Rewards, to increase market share within the growing online gaming community.

In a regulatory filing, GameStop also said that, since January 2021, it has been evaluating whether to increase the size of its at-the-market offering program and whether to potentially sell shares of its Class A Common Stock under the increased ATM program during the course of fiscal 2021, primarily to fund the acceleration of the company's future transformation initiatives and general working capital needs. The timing and amount of sales under the ATM Program would depend on, among other factors, GameStop's capital needs and alternative sources and costs of capital available to us, market perceptions about the company, and the then current trading price of its Class A Common Stock.

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