GameStop Sinks on Revenue Drop, Stock Offering: What to Know
GameStop stock is plunging Wednesday after the video-game retailer said sales declined in Q2 and that it's selling shares to raise cash.


GameStop (GME) stock is spiraling in Wednesday's session after the video-game retailer reported its second-quarter earnings results and announced an at-the-market stock offering.
In the 13 weeks ended August 3, GameStop's revenue decreased 31% year-over-year to $798.3 million. The company also said its bottom line swung to earnings of 4 cents per share from a loss of 1 cent per share in the year-ago period.
The results were mixed compared to analysts' expectations. Wall Street was anticipating revenue of $896 million and a net loss of 9 cents per share, according to MarketWatch.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
In the release, GameStop also announced an acceleration to its store closure plans.
"While this review is ongoing and a specific set of stores has not been identified for closure, we anticipate that it may result in the closure of a larger number of stores than we have closed in the past few years,” GameStop said.
In a separate release, GameStop announced an at-the-market offering of up to 20 million shares of its common stock, which it plans to use for "general corporate purposes."
When a company announces a stock offering, it often leads to a decline in its share price over concerns of dilution. A stock offering increases the number of shares available in the market and reduces the ownership percentage of existing shareholders. The dilution also negatively impacts a company's earnings per share since there are more shares outstanding.
A stock offering can also cause concern because it shows that the company needs additional capital and is willing to dilute existing shareholders to raise it.
Is GameStop stock a buy, sell or hold?
GameStop is likely better known for its meme-stock status, and considering this, it shouldn't be too surprising that shares have been volatile this year. Indeed, GME was up nearly 74% for the year to date in mid-May on some Roaring Kitty news, but has since pared this lead to 12%.
As such, most of Wall Street is staying away from GME. However, financial services firm Wedbush follows the consumer discretionary stock and has an Underperform rating, which is equivalent to a Sell. And its $10 price target on GME represents implied downside of 50% to current levels.
"While we admire GameStop's ability to manage operating losses, we think it would be just as reasonable for management to close all of its stores and operate as a bank," says Wedbush analyst Michael Pachter.
The company has about $10 per share in cash at the moment, "but without a hint of any strategy that would reasonably deploy capital, we do not see why shares trade at two times cash. GameStop announced accelerated store closures with its earnings, but with no replacement strategy in sight, management indirectly indicates that it is no longer beholden to shareholder interests."
Pachter adds that GameStop "faces a near insurmountable barrier to its planned return to growth."
Related Content
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Joey Solitro is a freelance financial journalist at Kiplinger with more than a decade of experience. A longtime equity analyst, Joey has covered a range of industries for media outlets including The Motley Fool, Seeking Alpha, Market Realist, and TipRanks. Joey holds a bachelor's degree in business administration.
-
Suze Orman's Number One Retirement Mistake
Interview Find out what Suze Orman thinks costs people thousands of dollars in retirement.
-
Stay NJ Could Give You $6,500: The Deadline You Can't Miss
Property Taxes New Jersey has a new property tax relief program for 2025. But the application deadline is fast approaching.
-
Don't Be a Sucker: The Truth About Guarantor and Cosigner Agreements
There are significant financial and relationship risks involved if you agree to be a cosigner or guarantor. Make sure you perform your due diligence, and know exactly what you're getting into, before agreeing to such a commitment.
-
The Hidden Risk Lurking in Most Retirement Plans: Human Behavior
What's one of the differences between a good financial adviser and a great one? The ability to use behavioral coaching to guide clients away from emotional decision-making and toward retirement success.
-
Addressing Your Clients' Emotional Side: Communication Techniques for Financial Advisers
Rather than focusing only on financial plans, you can better serve your clients — and grow your business — by learning what to say and do when a client gets anxious or emotional.
-
Stocks Struggle Ahead of Busy Fed Week: Stock Market Today
The minutes from the July Fed meeting will be released Wednesday, while Chair Powell will deliver a key speech at Jackson Hole on Friday.
-
Is Crypto Investing Coming to a Credit Union Near You?
Credit unions are getting in on crypto investing through partnerships with third-party platforms, but the risks to investors still apply.
-
Seven Hidden Downsides of Dividend Investing, From a Financial Adviser
Dividend investing could be draining your wealth with unexpected costs and limited growth potential. Here are some downsides, along with smarter strategies to take control of your retirement income.
-
How to Position Your Business for a Lucrative Exit Despite Private Equity's Slowdown
As private equity firms seek strongly performing companies, crafting a narrative about your business' high-quality assets and future opportunities can make a lucrative sale possible.
-
Don't Regret Buying a Home: An Expert Guide to Navigating Today's Tough Housing Market
Whether you're a first-time buyer, want to upsize/downsize or move closer to work or family, it's critical to stay within your budget and have an emergency fund.