GameStop surprised investors by swinging to a profit in the third quarter of 2024, even as revenue dipped compared to the previous year. This unexpected performance triggered a surge in after-hours trading on Tuesday.
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The video game retailer reported a net income of $17.4 million, translating to 4 cents per share. This positive result contrasts sharply with the $3.1 million loss, or 1 cent per share, recorded during the same period last year. However, revenue decreased to $860.3 million from $1.08 billion year-over-year.
Limited Analyst Coverage and a Bearish Outlook
GameStop receives limited coverage from Wall Street analysts. Notably, Michael Pachter of Wedbush, the sole analyst tracked by Visible Alpha, maintains an “underperform” rating on the stock with a price target of $10. In a recent note, Pachter expressed skepticism about GameStop’s growth prospects, citing “insurmountable barriers.”
The Meme Stock Phenomenon Resurfaces
The company found itself back in the meme stock spotlight last week following a cryptic social media post by influencer Keith Gill, also known as “Roaring Kitty.” Gill’s post on X (formerly Twitter) sparked a temporary 14% surge in GameStop’s share price on Thursday afternoon.
Share Price Performance and the Influence of “Roaring Kitty”
GameStop’s shares, which jumped over 10% in extended trading following the earnings announcement, had already accumulated a year-to-date gain of approximately 54% through Tuesday’s close. A significant portion of these gains occurred in May and June, after Gill resumed posting about the retailer for the first time since the meme stock frenzy of late 2020 and early 2021. This renewed attention from Gill reignited investor interest and contributed to the stock’s upward trajectory.
Conclusion: A Quarter of Surprises for GameStop
GameStop’s Q3 results presented a mixed bag for investors. While the return to profitability is a positive development, the decline in revenue raises concerns about the company’s long-term sustainability. The influence of social media and individual investors, particularly “Roaring Kitty,” continues to play a significant role in GameStop’s stock performance, highlighting the unique dynamics surrounding this meme stock. The company’s future performance remains uncertain, making it a closely watched entity in the market.
