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GameStop said Wednesday that its board had terminated CEO Matt Furlong. Ryan Cohen was elected executive chairman.
The company also reported a net loss of $50.5 million, or 17 cents a share. Sales were down 11%, to $1.24 billion.
The company cancelled its earnings call, scheduled for after the market’s close Wednesday.
Shares were down 17% in late trading.
Furlong, a former Amazon executive, had taken over as CEO in 2021.
Cohen’s responsibilities will include capital allocation and overseeing management, the company said.
This is breaking news. Read a preview of GameStop’s earnings below and check back for more analysis soon.
GameStop
will look to build on its last surprise quarterly profit when the company reports fiscal first-quarter results after the market closes on Wednesday.
GameStop stock (ticker: GME) was up 2% to $25.19 in Wednesday morning trading. The stock has gained 42% so far this year, though it is down 24% from where it was trading 12 months ago.
The videogame retailer has been cutting costs in recent quarters, which helped the firm report earnings of 16 cents a share in the quarter that ended in January. There aren’t enough analysts providing FactSet estimates to draw a consensus for the fiscal first quarter.
What we do know is that the company will benefit from a wave of major blockbuster videogame releases, which started with Hogwarts Legacy in early February and continued with Star Wars Jedi: Survivor in late April. The Legend of Zelda: Tears of the Kingdom in May and Diablo IV in June should keep the ball rolling for the fiscal second quarter. On the flip side, GameStop must weather the consumer shift from game discs to digital downloads, which has long cast a cloud on the stock.
“GameStop has the potential to deliver upside in [full-year fiscal 2023] given favorable trends for hardware and collectibles combined with increasing cost discipline,” writes Wedbush analyst Michael Pachter. “We expect greater management focus on cost control and GameStop’s strong net cash position ($1.35 billion for Q4:22) to allow the company to continue operating for several years in the face of multiple headwinds.”
Pachter is one of the few sell-side analysts still covering GameStop stock. He has an Underperform rating and $6.50 price target on its shares, which reflect $4.50 from net cash and a $2 going concern value.
“GameStop shares trade at a level that fails to consider its many challenges ahead,” he writes, pointing to a shift in sales to lower-margin hardware and the industry shift toward digital goods and online subscriptions.
The stock has held up despite such bearish views from many around Wall Street. The company’s biggest fans are on Reddit and other social media sites. After shares went parabolic in January 2021 amid enthusiasm from some users on Reddit’s WallStreetBets forum, the firm has garnered an online fan base who think Wall Street is undervaluing the business.
Earnings reports have been a reliable catalyst for GameStop stock volatility because it brings the stock more attention online. That attracts both buyers and short sellers, who sell borrowed shares to bet on a decline in price. Expect wild shifts for the stock, no matter what happens.
Write to Connor Smith at connor.smith@barrons.com