DanBrandenburg/E+ via Getty Images Last March, I initiated my coverage of GameStop Corp. ( NYSE: 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.
Seeking Alpha On June 8th before market bell, GameStop unexpectedly reported disappointing Q1 2024 earnings highlighted by a steep 29% decline in revenues, indicating that its core business is deteriorating rapidly. These disappointing results overshadowed a major catalyst for the stock which was a livestream by Keith Gill, a.k.
a Roaring Kitty, his first in almost 4 years. Moreover, GameStop announced a plan to sell up to 75 million shares to capitalize on the recent "meme" rally by further bolstering its balance sheet, which was rejuvenated by nearly $1 billion raised in May through the sale of 45 million shares. With the company exiting Q1 with nearly $1.
1 billion in cash, equivalents, and marketable securities, I'm estimating its current cash balance after the latest 2 offerings to be around $4.27 billion. These funds, if managed properly, could substantially improve GameStop's bleak outlook as I'll discuss in this article.
Despite this, I'm downgrading my rating for GameStop to a hold until management announces how they intend to use this potential war chest. Q1 Overview In my opinion, GameStop's Q1 earnings show that.
