Investors hit pause as GameStop goes quiet on rejig By Reuters

© Reuters. FILE PHOTO: A man walks in front of a GameStop store in the Jackson Heights neighborhood of New York City, New York, U.S. January 27, 2021. Picture taken January 27, 2021. REUTERS/Nick Zieminski/File Photo

By Medha Singh and Sagarika Jaisinghani

(Reuters) – GameStop Corp (NYSE:) tumbled 8% in early trading on Thursday, as the video game retailer’s silence on its turnaround plan led its army of small-time investors to question the meteoric rise in its share price this year.

The company posted a 25% jump in quarterly sales, but its executives failed to give fresh details about how it will refashion itself into a gaming and entertainment retailer despite recently raising more than $1 billion in fresh equity.

Shares fell 7.5% before the opening bell. At $183.92, they were well below the $482.95 that some investors had paid in January, when the stock was seeing wild swings at the height of a battle between small-time traders and Wall Street hedge funds.

Thursday’s price was, however, still nearly 10 times the $18 it traded at in December.

If GameStop closes lower on Thursday, it will be the fifth straight decline following an earnings update. Still, the pace of declines appears to have subdued compared with the 30% slide after the company’s previous two updates.

“When this meme trade ends (if ever) this will likely be a steep, ugly fall,” Jake Dollarhide, chief executive officer at Longbow Asset Management, said in a LinkedIn post.

GameStop earnings reaction

Going into the first post-earnings conference call by new Chief Executive Matt Furlong, investors had been looking for details on efforts by chairman Ryan Cohen to focus on e-commerce.

But the call lasted less than 10 minutes and “the CEO did not mention consoles or video games and given that the company completely relies on them, it was quite remarkable,” said Neil Campling, global TMT analyst at Mirabaud Securities.

GameStop faces competition from Microsoft Corp (NASDAQ:)’s Xbox, which is building its own streaming devices for cloud gaming to reach gamers on any television or monitor without the need for a console.

Net sales in the second quarter jumped to $1.18 billion, but GameStop also posted a bigger-than-expected adjusted loss of 76 cents per share.

Social media forums were abuzz with small-time traders complaining about the lack of disclosure about GameStop’s strategy.

“I understand Cohen’s belief in keeping your strategy close to your chest so the competition won’t know what you’re doing, but I’d like to learn something,” wrote one user on Reddit’s WallStreetBets.

“Regardless, I’m not selling.”

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