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GameStop Corp. GME rallied 10% during yesterday’s after-hours trading after the videogame retailer announced completion of its “at-the-market” (“ATM”) equity offering program, through which it has sold 5 million shares and generated more than $1.1 billion.
The company noted that it will use the proceeds from this sale for general corporate purposes, investing in growth initiatives and maintaining a healthy balance sheet.
This is the second time within a quick span of less than two months that the company is raising money through an ATM offering. Earlier this April, it raised $551 through the sale of 3.5 million shares.
Markedly, GameStop is one of the first Reddit-driven meme stocks. Shares of the company have skyrocketed 1070%, so far this year. The company, like several other social-media favorites, such as AMC Entertainment AMC, Express Inc., Castor Maritime and Torchlight Energy Resources, has been trying to bank on its stock-price appreciation through raising cash via ATM offerings.
Can GameStop Revive its Ailing Fortunes?
Unlike most other meme stocks, investing in GameStop might have been driven by some logical reasoning. Retail investors have been seemingly bullish on the company not only on the meme craze but also because of its serious efforts to turn itself around under the leadership of chairman Ryan Cohen.
The pandemic-driven shift toward online purchases of games has been worsening things for the already struggling brick-and-mortar retailer. Cohen is now, however, working on his goal to turn the company into the “Amazon of gaming” with the help of a fresh management team brought from Amazon AMZN and Alphabet’s GOOGL Google. Under Cohen’s guidance, GameStop is currently making an effort to transform itself in to a consumer-focused, online-oriented gaming company.
While it remains to be seen how successful GameStop eventually becomes in making a comeback as a global e-retailer, its fund-raising efforts taking advantage of the meme craze will surely help the turnaround initiatives.
The Meme Stock has Fundamental Strength
We believe GameStop has growth potential beyond the frenzy as it possesses some fundamental strength. It would not be a bad idea to take advantage of a good entry opportunity in the stock as the company has double-digit revenue and earnings growth potential.
GameStop has estimated earnings growth rate of 45.8% and revenue growth rate of 11.2% for fiscal 2022. Its earnings and revenues are projected to be up 44.6% and 2.9% year over year for fiscal 2023. The stock also carries a Zacks Rank #3 (Hold), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
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