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GameStop Q2 Preview: Rebound Quarter Inbound?

·3 min read

One of the market's most exciting stories over the last several years has been the uprising of “meme-stocks.”

Out of the bunch, GameStop GME was undoubtedly the most popular, shaking the market violently with a short-squeeze that was the magnitude of which is rarely seen.

No matter which side you were on, we can all agree on one thing – it was wild.

Now, it’s time for the company to report Q2 earnings on September 7th after the market close.

It raises a valid question, how does the meme-stock stack up heading into the print? Let’s take a closer look.

Share Performance & Valuation

Year-to-date, it’s been a wild ride for GME shares, with significant price swings. Still, shares are down more than 25% YTD, widely lagging behind the general market.

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Zacks Investment Research


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Over the last month, the price action of GME shares has been much more decisive, with shares losing nearly a quarter of their value and coming nowhere near the general market’s performance.

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Zacks Investment Research


Image Source: Zacks Investment Research

The company’s shares appear elevated in valuation – its forward price-to-sales ratio of 1.4X is well above its five-year median of 0.2X and its Zacks Sector average.

Further, GME carries a Style Score of an F for Value.

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Zacks Investment Research


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Quarterly Estimates

Analysts have been silent in their earnings outlook, with zero earnings estimate revisions hitting the tape over the last several months. Still, the Zacks Consensus EPS Estimate of -$0.38 reflects a year-over-year decline of a steep 100%.

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Zacks Investment Research


Image Source: Zacks Investment Research

However, the company’s top-line appears to be in much better shape – GameStop is forecasted to have generated $1.3 billion in revenue throughout the quarter, penciling in a solid 6% Y/Y uptick.

Quarterly Performance & Market Reactions

GameStop has struggled to exceed bottom-line estimates, falling short of the Zacks Consensus EPS Estimate in four consecutive quarters. Just in its latest print, the gaming giant penciled in a 53% bottom-line miss.

Top-line results have been much stronger; GME has exceeded top-line estimates in four of its previous five quarterly prints. Below is a chart illustrating the company’s revenue on a quarterly basis.

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Zacks Investment Research


Image Source: Zacks Investment Research

Despite the company’s two bottom-line misses, shares have increased in price following both reports.

Putting Everything Together

GME shares have remained highly volatile in 2022, with significant price swings and widely lagging the general market.

The company’s valuation levels appear a bit stretched, and the company carries a Style Score of an F for Value.

Analysts haven’t touched their earnings estimates, but projections reflect a steep bottom-line decline and a solid uptick in revenue.

Further, GME has struggled to exceed bottom-line estimates as of late, but quarterly revenue results have consistently exceeded estimates.

Heading into the print, GameStop GME carries a Zacks Rank #4 (Sell) with an overall VGM Score of a D.


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