GameStop Stock Volatility Ramps Up Ahead of Q1 Earnings

Our preview of the upcoming week's earnings reports includes GameStop (GME), Salesforce (CRM) and Lululemon Athletica (LULU).

A storefront of video game retailer GameStop (GME)
(Image credit: Getty Images)

GameStop (GME (opens in new tab), $139.66) has been in focus recently as shares of video game retailer have been volatile. Specifically, shares are up almost 72% from their mid-May bottom near $81 (though they're still down 10.6% on a year-to-date basis).

While not nearly the parabolic moves GME made when it earned its status as a meme stock back in early 2021, they are notable nonetheless.

And GME will remain in the limelight thanks to its spot on this week's earnings calendar. GameStop will unveil its first-quarter results after Wednesday's close.

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The company reported a quarterly loss in its last report, and analysts don't seem too upbeat this time around.

Wedbush analyst Michael Pachter has an Underperform (Sell) rating on GME and says he's "hard-pressed" to find any potential drivers of revenue growth.

"GameStop expanded its product offering to PC games and accessories, and we expect this category to add as much as $300 to $500 million in annual sales in the next few years, but we do not believe that the category will comprise a sizable portion of overall revenue," Pachter says.

Consensus estimates are for GameStop to report a per-share loss of $1.45 – much wider than the 45 cents per-share loss it recorded in the year-ago period. Revenue, meanwhile, is expected to be up a modest 3.1% year-over-year (YoY) to $1.3 billion.

Salesforce Demand Likely Slowing, Says Analyst

Like so many other tech stocks, Salesforce (CRM (opens in new tab), $161.45) has had a rough year on the charts. Shares are down more than 36% so far in 2022 – second only to Boeing (BA (opens in new tab)) in terms of worst year-to-date return among all the Dow Jones stocks.

But off the charts, CRM has "run into challenges," too, says Oppenheimer analyst Brian Schwartz.

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"Salesforce is likely experiencing slowing demand, mostly from the macro headwinds but also partly from execution," Schwartz explains. This, combined with worsening forex headwinds, "points to good but not great bookings and to Salesforce maintaining its constant-currency guidance."

Still, the analyst has an Outperform (Buy) rating on CRM, saying valuation remains reasonable when looking at the company's free cash flow (FCF) multiple against future FCF growth estimates. As such, "Longer-term investors have a unique opportunity to buy CRM's growth at a reasonable multiple," Schwartz adds.

For Salesforce's first-quarter earnings report, due out after Tuesday's close, analysts, on average, are calling for earnings of 94 cents per share (-22.3% YoY) and revenue of $7.4 billion (+23.3% YoY).

Lululemon Stock Bounces Before Q1 Earnings

Lululemon Athletica (LULU (opens in new tab), $294.61) has had a rough go of it on the charts recently, with shares down about 28% from their late-April peak above $400. However, LULU shot up more than 10% on May 26 after Morgan Stanley analyst Kimberly Greenberger upgraded the retail stock to Overweight from Neutral – the equivalents of Buy and Hold, respectively – saying the retail stock's selloff has created a compelling opportunity.

Will Lululemon's first-quarter earnings report – due out after Thursday's close – keep the wind at the stock's back?

William Blair analyst Sharon Zackfia (Outperform) is expecting the athletic apparel retailer to post a "strong first quarter," with the company likely to record its seventh straight quarter of 20%-plus year-over-year revenue growth.

"As reflected in management commentary indicating strong momentum in the business at its April 20 investor day, we expect Lululemon will meet or beat our projections for revenue and adjusted EPS at the high end of guidance, particularly as management reiterated comfort with both first-quarter and full-year guidance," Zackfia says.

For its first quarter, LULU is anticipating revenue to arrive between $1.525 billion and $1.55 billion, representing annual growth of 24% to 26%. Earnings per share are expected to land between $1.38 and $1.43 per share, compared to the $1.16 per share it reported in the year-ago period.

Wall Street's pros, for their part, have consensus estimates for earnings of $1.43 per share (+23.3% YoY) and revenue of $1.53 billion (+27.5% YoY).

Karee Venema
Contributing Editor, Kiplinger.com

With over a decade of experience writing about the stock market, Karee Venema is an investing editor and options expert at Kiplinger.com. She joined the publication in April 2021 after 10 years of working as an investing writer and columnist at Schaeffer's Investment Research. In her previous role, Karee focused primarily on options trading, as well as technical, fundamental and sentiment analysis.