GME - GameStop: Cash On Hand But Questions Remain

2024-06-10 15:12:57 ET

Summary

• GameStop reported disappointing Q1 earnings, highlighting the need to reset its business model.
• With the recent offerings in May and June, I’m projecting GameStop’s cash balance to be more than $4 billion, which I believe can be used to transform its declining business.
• I expect GameStop to use its cash to launch a new digital game store, transform into a holding company, or potentially announce a share buyback program.
• I’m downgrading my buy rating for GameStop to a hold, preferring to take a wait-and-see approach until management shares how they intend to use the company’s cash hoard.

Last March, I initiated my coverage of GameStop Corp. ( GME ) ahead of its Q4 2023 earnings with a buy rating, predicting the video game retailer to beat estimates. While GameStop's actual results fell below my expectations, its stock is up more than 110% since then, largely due to the resurgence of its "meme" status....

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