Should you buy GameStop stock?
  • 5 months ago
GameStop stock analysis. GME.
Visit our Substack for more:

GameStop stock jumped 40% yesterday after reporting its first quarterly profit in two years. However, the stock may not be a buy just yet.

At current prices, Gamestop has a market cap just over 7 billion dollars. The short squeeze allowed GameStop to pay off a lot of debt, and so the company now has net cash of 1.3 billion giving the company an enterprise value of roughly 5.7 billion.

In their latest quarter, Gamestop reported an impressive reduction in operating expenses. Cost of sales fell by 8% to 1.7 billion and SGA expenses dropped around 16%. This led to 48 million of net profit in the quarter, its first profitable quarter since 2021.
However, it’s not all good news. Revenue dropped 1% to 2.2 billion and if we look at the figures for the whole year the company is doing much worse. Net income for the whole of 2022 was negative 313 million and adjusted ebitda was negative 192 million with free cash flow of 52 million.

So Gamestop is valued at just under 1 times revenue or 109 times free cash flow.

Gamestop may have gone the way of Blockbuster if it wasn’t for the pandemic short squeeze that allowed the company to pay off billions of debt.

#stocks #investing #gamestopstock