GameStop shares fall as first earnings report released since Reddit-led rally
GameStop released its first earnings report on Tuesday since it became the subject of international attention during a Reddit-fuelled buying rally and named the former Amazon and Google executive Jenna Owens as its new chief operating officer.
The company’s sales and profit figures were slightly lower than analysts had expected and its shares, which had fallen 6.5% during the day, briefly gained 8% in after-hours trading before dropping more than 15%.
For the fourth quarter of 2020 GameStop’s net sales were $2.12bn compared to $2.19bn in the fiscal 2019 fourth quarter. Net income was $80.5m, both figures were below analysts’ forecasts. Between December and late January shares in the troubled video games retailer had shot up 1,700% as an army of small investors who had coalesced around the Reddit forum
WallStreetBets piled on to the company.
The investors had bet that Wall Street investors had overreached themselves betting that the share price would collapse and that its flagging fortunes would turn around after Ryan Cohen – founder of Chewy, the online pet supplies shop – bought a stake in the company and joined its board.
The extraordinary price surge in GameStop and other so-called meme stocks has led to congressional inquiries into the markets and the trading app Robinhood.
The shares which had been as low as $13 in December peaked at $347 on 27 January before collapsing once more in February and rallying again in March. On Tuesday GameStop told investors the share price stood at $181, valuing the company at $12.7bn.
Before the release GameStop announced its chief customer officer, Frank Hamlin, was stepping down, the latest in a series of exits since Cohen joined the board.
After the results call ended early, without the usual question-and-answer session from the chief executive, George Sherman, some on Reddit complained about the lackluster call. “Yeah, that call was rather terrible. No questions?? After the most volatile thing we’ve seen in the stock market … maybe ever? That was discouraging,” wrote one Redditor.
“Guys chill out nothing changed after this report. We knew that nothing changed. Just chill the fuck out,” posted another.