Mike Sakuraba graduated with double major of English and Economics. Part time writer, part time investor, full time dad. Mike loves writing about technology, sports, and investing.

2022-03-19 11:13

GameStop Earnings Miss
Video Game retailer GameStop (NYSE:GME) reported its earnings earlier this week and the results were enough to chisel away at even the hardest of diamond hands. The company reported a surprise loss for the quarter, losing $147.5 million compared to a profit of $80.5 million in the same quarter last year. Let me tell you one thing: the market does not like surprise losses when the company was previously profitable.

The fourth quarter has historically been a profitable one for GameStop and other retailers as it includes the crucial holiday season. The losses could be a product of declining game sales as the worst of the COVID-19 pandemic and lockdowns seem to be behind us. GameStop is also likely spending itself into some debt as the company looks to continue to remake itself through its ongoing digital transformation.

That transformation will see its long-awaited NFT marketplace launch by the end of the second quarter of this year. Clearly investors weren’t too thrilled by that though as shares dropped by 8.0% in extended trading following the call.

Can NFTs Save GameStop?
It’s difficult to say, to be honest. While the gaming-based NFT marketplace is anticipated to be a hit with gamers, game developers have been hot and cold with NFTs. Several major brands have pulled out of NFT projects including Electronic Arts (NASDAQ:EA) and Sega. There has been negative sentiment from gamers that NFTs in games are just another cash grab from developers and that there is no real utility for the game itself.

It’s not exactly a good look for GameStop as the NFT marketplace has been seen as one of the company’s saving graces. Its partnership with Immutable X is creating a $100 million fund for game developers but very little value falls to the actual gamers unless they resell their NFTs for a profit. Many gamers are also still concerned with the environmental damage that cryptocurrencies and the blockchain technology can cause, leading to further negative sentiment surrounding NFT-based games.

GameStop Stock Forecast
I wrote at the beginning of this year to not fall for GameStop’s digital transformation. Some of you aren’t going to like that but the stock is down over 40% since that article.

What’s left for GameStop? An NFT marketplace? Do you know who else announced that they were creating an NFT marketplace? Meta Platforms (NASDAQ:FB) app Instagram and Shopify (NYSE:SHOP). This isn’t to say that GameStop will be competing with these sites but more of a commentary on the sudden surge in NFT marketplaces being established. If GameStop were to end up competing with Instagram or Shopify or even OpenSea, I really don’t like its chances.

But once again, my advice for investing in meme stocks remains the same: this doesn’t mean the stock is going to fall further. We know these stocks do not behave according to market logic, so shorting a meme stock is like playing with fire. If you really want to avoid getting burned by GameStop, just don’t buy it. There are far better companies in the NFT and blockchain space that are worthy of your money.