By Janet H. Cho

When videogame seller and meme stock GameStop reports fourth-quarter results after today's market close, analysts and investors will be listening closely for more clarity on its strategic direction.

More important than its earnings results, GameStop faces questions about the profitability of its core business as it closes physical stores and expands beyond videogames amid the continuing shift to digital gaming.

The stock has risen 69% over the past 12 months, in part because of the return of investor Keith Gill, also known as "Roaring Kitty." There has been speculation that it might move into cryptocurrency, but shares are down 18% this year through Monday's close.

Analysts surveyed by FactSet expect GameStop to report fiscal fourth-quarter adjusted earnings of 8 cents a share, net income of $33 million, and sales of $1.48 billion.

For the prior fourth quarter, GameStop posted earnings of 22 cents a share and net income of $68 million on sales of $1.79 billion.

Michael Pachter, a managing director at Wedbush Securities and former CEO of Take-Two Interactive Software who specializes in the videogame sector, said it's possible that GameStop made a small operating profit for the holiday quarter.

"With that said, they likely generated another operating loss, and it is unfathomable that they will ever turn their core business (selling games) around by offering trading cards in their stores," he told Barron's in an email. When GameStop announced it was getting into the collectible trading cards business last October, he noted the company's "utter lack of competitive advantage" in the "wildly fragmented" business.

"Far more likely, they will continue to slowly liquidate by selling off assets" and by closing stores when their leases expire, Pachter said Monday. "That leaves them with 'profits' on investment income from their $4.6 billion cash hoard, which they raised by virtue of their meme stock status."

For the full fiscal year ending in January, GameStop is expected to report adjusted earnings of 7 cents a share and sales of $4.02 billion. For the previous fiscal year, GameStop posted adjusted earnings of 6 cents a share on sales of $5.27 billion, according to FactSet.

GameStop management doesn't hold conference calls to discuss results, and because few analysts follow the company, the consensus forecast as tracked by FactSet is likely to be less accurate.

Based in Grapevine, Texas, the company offers games and entertainment products online and in stores in the U.S., Canada, Australia, and Europe.

Pachter noted that GameStop trades at around 2.5 times cash, "and since their operations are virtually worthless, the share price is telling you that investors have a ton of faith in CEO Ryan Cohen's ability to pick investments for them."

The stock rose on Feb. 10 after Cohen posted a photo of himself on social media with Michael Saylor, CEO of MicroStrategy, the largest institutional holder of Bitcoin. "MicroStrategy trades as around twice the value of its Bitcoin holdings, so it remains to be seen if Ryan Cohen can find a better cryptocurrency to invest in and drive GME share to 2.6 times the value of its assets," Pachter said.

On March 3, GameStop announced a deal with digital financial services company Zip Co. to let U.S. customers pay in installments for their online and in-store gaming purchases.

Zip U.S. CEO Joe Heck said at the time that nearly 84% of Zip's U.S. customers shop for gaming and accessories at GameStop. "Gaming is one of Zip's most popular categories overall, making Zip an ideal partner for helping these shoppers responsibly purchase goods and services from one of the industry's fan-favorites and top businesses."

Write to Janet H. Cho at janet.cho@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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March 25, 2025 11:33 ET (15:33 GMT)

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