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GameStop stock falls on mixed earnings

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Yahoo Finance's Brian Sozzi and Julie Hyman break down GameStop's latest earnings report and outlook for the company.

Video Transcript

JULIE HYMAN: But first, let's get to GameStop this morning, and that remarkable story that does continue. Let's run through the numbers first here because the company did report numbers. $0.76 loss, which is wider than the $0.67 that were estimated. Sales up 26% to $1.18 billion. That's a year-over-year increase in the sales.

And the company played its conference call on YouTube. More than 22,000 people were listening, but none of them, including the analysts who were on the call, got to ask questions. Brian Sozzi, I am sure, I'm quite sure that you have a view on that method of conference call by the company.

BRIAN SOZZI: Yeah, my take is very simple-- if you're GameStop, why even waste anybody's time to even have a conference call? Just put out your lame 8-K, as they actually did, and follow up with your 10-Q. A lot more interesting reads there. So stop wasting people's time with even trying to hold a call if you're not going to take any questions from retail investors, like AMC CEO Adam Aron, or like traditional-- a traditional company would do with Wall Street. But I will say this, no analysts cover GameStop, so nobody would probably show up anyway and ask questions.

What I did find interesting from the 10-Q, because the 8-K read was completely useless for this company, they now view themselves as a tech company. And I tweeted that out last night. Got a lot of good laughs from folks and Twitter followers. Potentially, maybe that is GameStop investors reacting to it.

But they no longer see themselves as a retailer, Julie. GameStop now views itself with a tech-- as a tech company perhaps on par with an Apple, Microsoft or Google. Who knows because there is no clear-cut plan from GameStop, and it definitely wasn't offered on that, what, 25-minute earnings call.

Also interesting in the 10-Q, Julie, is some of the priorities GameStop is now focused on. They want to increase their addressable market, or as our former colleague Myles Udland would say, increase their TAM. So they're going to do that by increasing sales of consumer electronics, collectibles, such as Funko dolls and figurines, toys and other categories. They're looking to expand their fulfillment operations and building a superior customer experience, and probably create more of a hotline for people that are playing games, and they need help hooking up their consoles or games.

That's all fine and good, but Julie, it's not like GameStop is going to turn stores into a Best Buy here. There's just no insight on what they plan to do. And that's disturbing. And investors are rightly punishing the stock here, as they should. Absurd.

JULIE HYMAN: Well, what's interesting, too, is one of the things that the new CEO, Matt Furlong, said on the conference call-- you know, and they've-- as we've mentioned, they've poached all these executives from Amazon-- he said that people should judge us by our net sales growth. OK, so the net sales growth year over year, as I mentioned, was 26%. But on the two-year basis, it was down 8.5%. And as we know, you've got to look at the two-year basis because 2020 was such an anomaly. And so if we're judging them by their net sales growth, it doesn't look great, right?

And I-- you know, I think it's-- at this point, it's an article of faith among those who are watching the company based on the fundamentals that there is no, you know, no detailed plan here. So I think that, at this point, it seems like-- that people are on the same page. I'm sure there are still a lot of retail investor faithful for this stock who think that it should be not going down today, but it's going to be harder and harder, I think, as time goes on to hew to that view when you're not getting the details and the numbers that you need, Brian.

BRIAN SOZZI: No, and you cannot-- you're not going to value a company on sales. There's other line items on the financial statements. There's a cash flow statement. There's rest of the items on the income statement. You cannot just singularly focus on sales if you're an investor in a GameStop just because they want you to. And then secondarily, they want you to focus on that because they're not making any money, and they're not going to make any money this quarter. They're not going to make any money probably for the holiday season. They're probably not going to make any money for 2022. So that's why these executives want you to focus on that.

But I will say this. Matt Furlong, first earnings call, 25 minutes or so, whatever it was, as the CEO of GameStop. Usually, in order to get these gigs, in order to become a CEO of a public company, you have to develop some form of presentation to the board of directors, tell them what you plan to do with the company. And I'm starting to wonder if he was just hired based on his resume and his LinkedIn profile, because if he had a plan, any form of plan, just give us a little something. Give the investors that have backed your company for about a year, give them a little taste of what you want to do. Just whip off a piece of the presentation that you presented to the board to get your fat-paying gig. And he didn't do that, and I think it's time he does.

JULIE HYMAN: Just one quick note on what you were saying. You can value a company on sales, many people do for many different companies, if they are a growth company. And if they are really a tech company, which is what GameStop is alleging that it is, without actually backing it up-- now, the company does have these two fulfillment centers now, one in York, Pennsylvania, one in Reno, Nevada that it's building out, which suggests that they're going to do more e-commerce, but again, it's all suggests. It's all hints. It's not explicit what their plan is. So you can't take them on their word that it's a tech company without knowing how it's a tech company.

So sure, do price to sales all you want if they're going to give you better growth than 25% year-over-year and an 8.5% drop over the two-year period. I mean, if you look at the longer-term sales chart, this company has been waning. And you can't value them on sales growth until they really boost that sales growth a little more significantly.

All right, moving on because we're both fired up over GameStop this morning.