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GameStop (GME) to Report Q4 Earnings: What Awaits the Stock?

GameStop Corp. GME is slated to report fourth-quarter fiscal 2021 results on Mar 23, after the closing bell. After an epic trading saga in the recent past, thanks to short-squeeze events, all eyes are set on this gaming retailer’s upcoming quarterly announcement.

Coming to estimates, GameStop is likely to register top- and bottom-line growth when it reports fourth-quarter numbers. The Zacks Consensus Estimate for revenues is pegged at $2,242 million, which indicates an increase of 2.2% from the prior-year quarter’s reported figure.

The Zacks Consensus Estimate for earnings is currently pegged at $1.46 per share for the fourth quarter. The consensus mark, which has remained stable in the past 30 days, suggests a rise of almost 15% from earnings of $1.27 per share reported in the prior-year quarter. We note that GameStop delivered an earnings surprise of 34.6% in the last reported quarter.

GameStop Corp. Price, Consensus and EPS Surprise

GameStop Corp. price-consensus-eps-surprise-chart | GameStop Corp. Quote

Key Aspects to Note

GameStop’s top line is expected to gain from growth in e-commerce sales as well as strong demand for consoles. In its last earnings call, management stated that fourth-quarter performance is likely to gain from new video console launch. Management highlighted that the transition from generation eight to generation nine console video gaming products is likely to drive growth, as the early consumer response toward these products have been encouraging.

Speaking of e-commerce, we note that the company has been gaining from enhanced fulfillment capabilities including the roll-out of same-day delivery option across several stores. Also, its expanded search and navigation features, post-purchase services, mobile app capabilities as well as flexible payment options have been supporting digital expansion. Also the company’s partnership with Microsoft Corporation MSFT for providing customer with enhanced digital solutions is worth appreciating.

Notably, on Jan 11, 2021, management provided details regarding its sales performance for the nine-week period ended Jan 2, 2021. For the said duration, the company’s comparable store sales increased 4.8% year on year. Markedly e-commerce sales surged 309%. Such trends are likely to have continued in the rest of the quarter as well.

Apart from these, the company’s strategic efforts to boost assortments, optimize inventory and manage costs are likely to have supported fourth-quarter performance. Markedly, the company is focusing on high margin product categories such as PC gaming accessories, private label and collectibles. Also, its effort to augment store experience and expand PowerUp Rewards loyalty program have been yielding.

However, we cannot ignore the concerns surrounding supply-chain constraints amid the pandemic as well as rise in freight expenses. Also, store closures, undertaken as part of the company’s de-densification strategies, are likely to have been a drag on fourth-quarter performance.

What the Zacks Model Unveils

Our proven model doesn’t conclusively predict an earnings beat for GameStop this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

GameStop currently carries a Zacks Rank #3 and an Earnings ESP of 0.00%.

Stocks Poised to Beat Estimates

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat.

Darden Restaurants, Inc. DRI currently has an Earnings ESP of +2.70% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Dave & Busters Entertainment, Inc. PLAY has an Earnings ESP of +0.99% and a Zacks Rank #3, at present.

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Microsoft Corporation (MSFT) : Free Stock Analysis Report

Darden Restaurants, Inc. (DRI) : Free Stock Analysis Report

GameStop Corp. (GME) : Free Stock Analysis Report

Dave & Busters Entertainment, Inc. (PLAY) : Free Stock Analysis Report

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