GameStop (NYSE: GME) stock price has been under pressure over the past five years. Its stock price had lost 60% of value in the last twelve months alone, extending five years selloff to 88%. The shares plummeted from $45 level in 2015 to $5 at present. The bearish trend is likely to extend the momentum amid a bleak financial outlook.
The company has recently reported lower than expected results for the second quarter. In addition, it has highlighted a bleak outlook for the rest of the year.
GameStop missed Q2 revenue estimate by $40 million. Its second-quarter revenue of $1.29B declined 14% year over year.
Its new hardware sales plunged 41.1% while new software sales dropped 5.3% year over year. Accessories sales decreased by 9.5% Y/Y. Moreover, pre-owned sales declined 17.5% and digital receipts plummeted 11.2% year over year in the second quarter.
Jim Bell, GameStop’s chief financial officer said, “While we experienced sales declines across a number of our categories during the quarter, these trends are consistent with what we have historically observed towards the end of a hardware cycle.”
The company has recently announced a new business strategy to handle the headwinds. It is now working on a new strategic plan that is anchored on four tenets:
- Optimizing the core business by driving efficiency and effectiveness
- Creating the social and cultural hub of gaming within each GameStop
- Building compelling digital capabilities
- Transforming vendor and partner relationships
Although its new business plan looks attractive, the company needs a longer time for complete stabilization.
It expects to generate a low teen digit decline in revenues in 2019 compared to the previous year. Previously the company had predicted a single-digit decline in revenues.
The company now expects earnings per share in the range of $1.15 to $1.30 compared to the analysts’ consensus estimate for $1.61. Overall, GameStop stock price is likely to extend the bearish trend. Declining financial numbers and restructuring actions could keep the stock price under pressure.
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