Why GameStop (GME) Shares Are Trading Lower Today
What Happened:
Shares of video game retailer GameStop (NYSE:GME) fell 19.9% in the pre-market session after the company reported fourth-quarter results with revenue unfortunately falling short of analysts' expectations, driven by significant underperformance in its software segment ($465m of revenue vs. estimates of $670m). Because the company's software products have higher profit margins than its hardware products, it missed Wall Street's estimates on nearly every profitability metric. The company also didn't provide any guidance and said it would not host a conference call to discuss the results, which raises an eyebrow. Overall, this was a bad quarter for GameStop.
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What is the market telling us:
GameStop's shares are very volatile and over the last year have had 31 moves greater than 5%. But moves this big are very rare even for GameStop and that is indicating to us that this news had a significant impact on the market's perception of the business.
The biggest move we wrote about over the last year was 6 months ago, when the stock gained 6.4% on the news that the company announced the appointment of Ryan Cohen as President, Chief Executive Officer and Chairman, effective immediately. While currently serving as Executive Chairman, Mr. Cohen will step down from this role upon assuming the position of Chairman. Cohen founded -ecommerce pet company Chewy in 2011 and served as Chewy's CEO until 2018. Following the sale of Chewy in 2017 and its IPO in 2019, Cohen disclosed a near 10% stake in GameStop in September 2020, making him the company's biggest individual investor. He then joined the board in January 2021 and has been credited with some major changes such as a few major executive replacements.
GameStop is down 21.2% since the beginning of the year, and at $13.15 per share it is trading 51.2% below its 52-week high of $26.95 from June 2023. Investors who bought $1,000 worth of GameStop's shares 5 years ago would now be looking at an investment worth $5,108.
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