GameStop Stock Plummets as Company Plans to Sell Shares Amid Declining Sales

GameStop's stock faced a sharp decline, dropping over 20% in the premarket session on Friday, following the company's disclosure of its intention to sell additional shares alongside reporting a drop in preliminary sales for the first quarter.

Announcement of Shares Sale

The company announced its plan for an at-the-market offering, proposing up to 45 million Class A common shares. This decision to sell shares comes soon after a significant rise in GameStop's shares earlier in the week, hinting at a temporary resurgence of the meme stock phenomenon.

First Quarter Sales Down

Alongside the shares sale reveal, GameStop released preliminary sales figures for the first quarter, which indicate a decrease, with net sales expected to fall between $872 million and $892 million. This is a notable descent from $1.237 billion in the corresponding quarter from the previous year, also falling short of the roughly $1 billion revenue projection anticipated by two analysts surveyed by FactSet.

The company is also anticipating a net loss ranging from $27 million to $37 million, which stands as an improvement when compared to last year's net loss of $50.5 million. GameStop continues to face robust competition from digital e-commerce platforms and has recently undertaken job cuts to mitigate costs.

Short-lived Rally

The stock experienced a brief rally earlier in the week, propelled in part by activity from Keith Gill, known as Roaring Kitty, who was central to the meme stock craze in 2021. However, the rally was not sustained, and the stock's value suffered later on. By Thursday's close, the shares were trading at a significantly reduced value compared to earlier in the week.

Analyst's Perspective

Wedbush analyst Michael Pachter offered a critical outlook, casting doubts on GameStop's ability to return to profitability and maintain it. With the rating of underperform, he conveyed skepticism about GameStop's potential for revenue and profit growth, given the diminishing nature of its core business.

GameStop, Shares, Sales