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.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.

Sign up for Kiplinger’s Free 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.
-
Planning a Major Home Renovation? 3 Smart Ways to Finance It
From HELOCs to personal loans, here’s how to pay for a major home renovation without draining your savings.
-
Six Warren Buffett Quotes Every Retiree Should Live By
The 'Oracle of Omaha' knows a thing or two about life, investing and retirement.
-
Six Warren Buffett Quotes Every Retiree Should Live By
The 'Oracle of Omaha' knows a thing or two about life, investing and retirement.
-
Budget Hacks Won't Cut It: These Five Strategies From a Financial Planner Can Help Build Significant Wealth
Cutting out your daily latte might make you feel virtuous, but tracking pennies won't pay off. Here are some strategies that can actually build wealth.
-
To Unwrap a Budget-Friendly Holiday, Consider These Smart Moves From a Financial Professional
You can avoid a 'holiday hangover' of debt by setting a realistic budget, making a detailed list, considering alternative gifts, starting to save now and more.
-
Stocks Rise to End a Volatile Week: Stock Market Today
The market's fear index reached and retreated from a six-month intraday peak on Friday as stocks closed the week well.
-
I Bought Palantir When It Was Trading at $8. Now It's $180 and I've Made $1 Million. What Do I Do?
What do you do with all that appreciated Palantir stock? We asked a financial expert for advice.
-
Treat Home Equity Like Other Investments in Your Retirement Plan: Look at Its Track Record
Homeowners who are considering using home equity in their retirement plan can analyze it like they do their other investments. Here's how.
-
Why Does It Take Insurers So Darn Long to Pay Claims? An Insurance Expert Explains
The process of verification, investigation and cost assessment after a loss is complex and goes beyond simply cutting a check.
-
Two Reasons to Consider Deferred Compensation in the Wake of the OBBB, From a Financial Planner
Deferred compensation plans let you potentially lower your current taxes and help to keep you out of a higher tax bracket. It's important to consider the risks.