Last year, GameStop Corp. (GME) saw a significant change in its leadership, with activist investor Ryan Cohen appointed as CEO. Additionally, in its third-quarter earnings report, the company announced a new investment policy, allowing GME to invest in equity securities. On top of that, the company’s Board authorized Cohen to manage the company's securities portfolio.
Wedbush Securities analyst Michael Pachter termed the new investment move as "alarming" and "inane." Moreover, this investment style could lead to an increase in meme activity in the stock. Although social media is likely to keep the hype surrounding meme stocks alive in the foreseeable future, this could also lead to heightened volatility.
With the stock closing its last trading session at $15.16, lower than the 100-day and 200-day simple moving averages of $15.70 and $19.03, it might be wise to avoid the stock now. Let’s look at the trends of GME’s key financial metrics to gain further insight.
Analyzing GameStop Corp.'s Financial Performance and Associated Trends 2021-2023
The trailing-12-month revenue trend of GME has shown noticeable fluctuations over the given period from May 2021 to October 2023. Here's a snapshot of key points:
- In the initial stages, from May 2021 ($5.35 billion) to July 2022 ($6.11 billion), there was a consistent upward trend in revenue.
- However, after reaching a peak in April 2022, a downtrend was observed. The revenue declined to $5.95 billion in October 2022 and then slightly increased to $6.06 billion by July 2022.
- Continuing this overall downward trend, the revenue dropped to $5.70 billion by October 2023.
Focusing on the most recent data, GME's revenue specifically decreased from $5.81 billion in July 2023 to $5.71 billion in October 2023. The transformed series of data showed an overall growth rate of approximately 6.75% when comparing the last value with the first value over the span of two years.
This means that even though there were significant fluctuations throughout the measured time period, GME saw an overall increase in revenue. However, the most recent trend indicates a decrease in sales, which could imply business challenges for the company going forward if this trend remains consistent.
The current ratio of GME has demonstrated some degree of fluctuation over the reported period. Here's an overview:
- May 2021: The current ratio was at 1.36.
- July 2021: Witnessed a significant increase to 2.23.
- October 2021: A decrease was seen, with the ratio falling to 1.9.
- January 2022: A slight rise occurred to 1.918.
- April 2022: The ratio again increased to 2.067.
- July 2022: A further improvement was noted, with the ratio reaching 2.17.
- October 2022: A considerable drop was observed to 1.63.
- January 2023: The ratio increased slightly to 1.74.
- April 2023: A minor decrease took the ratio to 1.71.
- July 2023: The ratio again increased to 1.87.
- October 2023: A decrease was recorded, taking the ratio to 1.65.
When comparing the current ratio from May 2021 (1.36) to the last recorded value in October 2023 (1.65), we can see an overall growth rate of 21%. The most recent data from October 2023, however, shows a downturn compared to the preceding value in July 2023.
Looking at the available data, a comprehensive summary of the trend and fluctuations in the asset turnover of GME includes:
- Starting from an asset turnover value of 2.136 in May 2021, there was a noticeable downward trend, effectively reaching as low as 1.755 by April 2022.
- More specifically, between May 2021 and January 2022, GME's asset turnover observed a consistent decrease, which reflects decreased efficiency in the firm's asset utilization during this period.
- However, the figures began to gradually increase after April 2022, peaking at 1.918 on January 28, 2023.
- From April 2023 onwards, a mildly fluctuating but generally stable trend was observed, with fluctuation in a narrow range of around 1.88.
As for the growth rate, calculated from the first value (May 2021) to the last value (October 2023), GME's asset turnover decreased by approximately -12%. Taking into account the most recent numbers, it is crucial to note that the asset turnover ratio for GME remained fairly steady at around 1.88 as of October 2023, which suggests overall stability in the efficient use of its assets in relation to generating revenues.
Nevertheless, while this current stability is a noticeable improvement from the April 2022 bottom, it is still below the level seen in early 2021. This underlines the need to watch the future performance of asset turnover for further signs of improvement or otherwise.
The analyst price target for the GME shows a declining trend over the data series, ending more significantly lower than it started. Specifically, the data includes the following highlights:
- Starting from November 2021 with an analyst price target of $25.
- Marked an increase to reach $34 in January and February of 2022.
- Experienced a fluctuation with slight declines through March to May 2022, where it steadied at $30.
- A drastic decline was recorded between June and July 2022, dropping from $30 to $17.5.
- The price target lowered steadily throughout the remainder of 2022, bottoming out at $15.76 by December.
- Began 2023 at a further declined value of $13.33.
- Declined slightly further in February to $12.65, but then rebounded to $13.25 by April 2023, maintaining this steadiness up to May 2023.
- Then followed a period of marginal fluctuation until October 2023, hovering slightly around $13.
- By the end of 2023, the analyst price target fell significantly again to reach its lowest value of $11.12.
- The series ended on January 2, 2024, with an analyst price target of $10.5.
The total growth rate for this data series, measuring the difference between the first ($25 in November 2021) and the last value ($10.5 in January 2024), indicates a decrease of approximately 58%. This suggests that, overall, analysts have gradually lowered their price target for GME over the given time frame.
Tracking GameStop's Share Price: Period of Decline, Recovery, and Subsequent Deceleration
In reviewing the data provided for GME, several trends and changes in share price can be noted from July 2023 through January 2024.
- Beginning in July 2023, GME experienced a decreasing trend in share price. Starting at $23.20 on July 14, 2023, the share price gradually decreased to $17.30 by August 25, 2023.
- An upward bump in the share price occurred in early September 2023. The share price increased, albeit slightly, from $18.29 on September 1, 2023, to $18.64 on September 8, 2023.
- Following this slight raise, the share price began to descend again, reaching a low of $14.95 on October 6, 2023. This marks the sharpest decrease within this period, with a drop in value of just over 12% from the previous month's lowest value ($17.10 on September 29, 2023).
- From October to December 2023, the share price continued to dwindle, reaching its lowest point of $12.52 on November 24, 2023.
- Thereafter, a clear upward trend is noticeable; starting from the first week of December 2023 at $14.38, the share price rapidly climbed, reaching its peak of $17.74 on the last week of the year, December 29, 2023. The rate of growth during this period shows an accelerated increase, marking a growth of almost 42% within one month.
- In January 2024, the share price experienced a deceleration, with values dropping from $16.53 on January 5, 2024, to $15.16 on January 9, 2024.
From this data, it's clear that GME experienced significant fluctuations in share price over the observed period, with deceleration periods interrupting the overall decreasing trend, followed by a notable accelerated growth at the end of the year, which tapered down again in early 2024. Here is a chart of GME's price over the past 180 days.
GameStop's Performance Dynamics: Examining Growth, Quality, and Momentum Trends
GME's POWR Ratings grade has been fluctuating between C (Neutral) and D (Sell) during the period from July 2023 to January 2024. The POWR grade of a stock is a composite score that examines multiple factors to get a holistic understanding of the value of a particular stock.
As of the latest data point in January 2024, the GME's POWR grade is D (Sell). This indicates a relative underperformance compared to its peers. Here's the performance overview within the given period:
- Highest rank in category: 35 (achieving this on December 2023 and continuing through January 2024)
- Lowest rank in category: 41 (recorded in the weeks of August 19, August 26, and September 2, 2023)
- Most frequent POWR grade: D (Sell) This suggests that throughout much of the latter half of 2023 and into early 2024, GME's performance, as measured by the POWR grade and its ranking within the Specialty Retailers category, has been less than stellar.
While GME did make some progress in December 2023, overall, it remains in the lower tier of the category, which comprises a total of 43 stocks.
The three most noteworthy dimensions for GME, as per our analysis of the POWR ratings, can be identified as Growth, Quality, and Momentum. These ratings consider data from July 2023 to January 2024.
Growth: This dimension generally retains high scores throughout. Starting from an impressive 81 in July 2023, it experiences a slight decrease to 79 in August, after which there's a considerable rise, hitting its peak at 97 in October 2023. The ratings then slightly declined in subsequent months: 96 (November), 86 (December), and finally 84 in January 2024.
Quality: Rating trends for Quality show a gradual decline during the period. Starting at 60 in July 2023, the dimension dips marginally each month, bottoming out at 53 by October 2023. In the following months, however, there was a notable recovery, with ratings climbing back to 63 in December 2023 and settling at 62 in January 2024.
Momentum: This dimension maintains oscillatory progression throughout the designated period. Starting with a score of 21 in July 2023, it increases to 25 in August and plummets to 16 in September, only to rise to 18 in October. Again, a decline to 12 is seen in November, followed by a boost to 24 in December. The score closes at 17 in January 2024, presenting a zigzag trajectory overall.
These dimensions, with their fluctuating trends and varying degrees of intensity, depict a rich picture of GME's performance dynamics in the designated timeline.
How does GameStop Corp. (GME) Stack Up Against its Peers?
Other stocks in the Specialty Retailers sector that may be worth considering are Betterware de México, S.A.P.I. de C.V. (BWMX), Pan Pacific International Holdings Corporation (DQJCY), and Aeon Co., Ltd. (AONNY) - they have better POWR Ratings. Click here to explore more Specialty Retailers stocks.
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GME shares were trading at $15.62 per share on Wednesday afternoon, up $0.46 (+3.03%). Year-to-date, GME has declined -10.90%, versus a -0.06% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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