GameStop Share Price Forecast December 2021 – Time to Buy GME?
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Shares of American video game, consumer electronics, and gaming merchandise retailer GameStop (NYSE: GME) are in the green today, after closing at $155.64 as of December 17th (19:59 EST). GameStop has met most of the estimates for its 3rd quarter but has widely missed earnings projections put forward by analysts. The management of the company limited its earnings conference call to just management’s prepared remarks.
GameStop – Technical Analysis
GameStop’s financial statement indicates that the market cap is at $11.883 billion with total assets worth $3.762 billion. Revenue for 2020 was at $5.09 billion with a profit margin of -4.23% compared to $6.47 billion.
Moving averages such as Exponential Moving Average (10)(158.20), Simple Moving Average (10)( 156.67), Exponential Moving Average (20)(170.78), Simple Moving Average (20)(180.03) and Exponential Moving Average (30)(177.45) are indicating a sell action. Oscillators such as Relative Strength Index (14)(40.85), Stochastic %K (14, 3, 3)(25.86), Commodity Channel Index (20)(−67.36), Average Directional Index (14)(29.50) and Awesome Oscillator(−46.71) are neutral.
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Recent Developments
As mentioned before, GameStop released its third-quarter results which indicated that revenue increased by 29% to reach almost $1.3 billion, which puts it closer to pre-2019 levels when it generated sales of $1.4 billion. Other metrics indicate that losses widened significantly in the period to $1.39 per share from $0.53. The company’s expenses increased to $421.5 million which is not unexpected since the company is investing heavily in digital and online sectors.
GameStop recently opened a new customer care facility in Florida which has hired 500 employees. This is the latest addition in GameStop’s infrastructure investments which also includes two large fulfilment centres in Nevada and Pennsylvania. GameStop recorded a front-load inventory increase of $1.1 billion which is not surprising considering the supply chain issues. Overall it begun the year with opening 3 distribution centres and has added new Amazon-sized fulfilment centres in York, Pennsylvania, and Reno, Nevada.
Should You Buy GME Shares?
GameStop has several challenges it needs to overcome if it wants to meet the online gaming world head-on. It has to get products to gamers quickly which is why the company s filling its new warehouses with products that it can speedily ship to its customers. However, the company eschews details regarding how the business is performing in relation to management’s plans, which can discourage investors.
According to CEO Matt Furlong, the company’s massive losses are just part of a long-term strategy, as revenue growth will translate to scale and market leadership. But experts believe that this quixotic strategy to grow revenue at all costs will just aggravate GameStop’s losses. While the company’s future endeavours such as expanding its assortment with consumer electronics products like TVs might drive some top-line growth, it will come at the expense of profits. The competitors in the market such as Best Buy is set to generate over $50 billion of revenue this year, compared to less than $6 billion for GME.
Many predict that GameStop will become a smaller less profitable version of Best Buy. While it will eventually find a sustainable business model, many predict that it will continue losing money and burning cash. Considering that investors can invest in the likes of Best Buy and other companies which have a valuation of over $25 billion, GameStop’s $12 billion valuation dwarfs this. Considering this point now is not the time to invest in GME shares.
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