Why Is GameStop (GME) Up 13.8% Since Last Earnings Report?

A month has gone by since the last earnings report for GameStop (GME). Shares have added about 13.8% in that time frame, outperforming the S&P 500.Will the recent positive trend continue leading up to its next earnings release, or is GameStop due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts. GameStop Q3 Earnings Beat Despite Sales Decline of 20% Y/YGameStop posted third-quarter fiscal 2024 results, wherein the top line missed the Zacks Consensus Estimate and declined year over year. On the contrary, the bottom line beat the consensus mark and improved from the year-ago period.GameStop’s Quarterly Performance: Key InsightsGME posted adjusted earnings per share of 6 cents, beating the Zacks Consensus Estimate of break-even earnings.GameStop reported net sales of $860.3 million, which missed the consensus estimate of $900 million. Also, the metric decreased 20.2% from $1,078.3 million in the year-ago quarter. The decrease in consolidated net sales was caused by lower sales across all categories.By sales mix, hardware and accessories sales fell 28% to $417.4 million from $579.4 million in the year-ago quarter. Software sales were $271.8 million, down 15.4% from $321.3 million in the year-ago quarter. Sales in the collectibles unit declined 3.7% to $171.1 million from $177.6 million in the year-ago quarter.By geographic location, net sales declined 24.5% in Canada, 22% in Europe, 20.4% in the United States and 12.5% in Australia year over year.Insight Into GME’s Margins & Expenses PerformanceGross profit decreased 8.7% to $257.2 million from $281.8 million in the year-ago quarter. The gross margin expanded 380 basis points (bps) to 29.9% compared with 26.1% in the third quarter of fiscal 2023. This margin expansion was driven by a strategic shift toward higher-margin product categories, including collectibles and preowned hardware and accessories, along with enhanced inventory management.Adjusted selling, general and administrative (SG&A) expenses declined 4.4% to $281.8 million from $294.9 million in the year-ago quarter. As a percentage of net sales, adjusted SG&A expenses were 32.8%, up 550 bps from 27.3% in the year-ago period. GameStop reported an adjusted EBITDA loss of $11.2 million, down from an adjusted EBITDA of $5.1 million in the same quarter last year.The company’s adjusted operating loss was $24.6 million in the reported quarter compared with an adjusted operating loss of $13.1 million in the prior-year period.GME’s Financial Snapshot: Cash, Debt & Equity OverviewGameStop ended the fiscal third quarter with cash and cash equivalents of $4.58 billion, marketable securities of $32.8 million, net long-term debt of $9.6 million and stockholders’ equity of $4.8 billion. Merchandise inventory totaled $830.2 million at the end of the fiscal quarter, down from $1,021.3 million in the same period last year.During the 13 weeks ended Nov. 2, 2024, the net cash flow provided by operations was $24.6 million compared with $19.1 million in the prior-year period. Free cash flow for the period totaled $20 million, while capital expenditures amounted to $4.6 million.GME also concluded its previously announced "at-the-market" equity offering program, raising approximately $400 million in gross proceeds through the sale of 20 million shares.How Have Estimates Been Moving Since Then?Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.VGM ScoresCurrently, GameStop has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.OutlookGameStop has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.Research Chief Names "Single Best Pick to Double"From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report GameStop Corp. 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