GameStop (GME – yield 8.6%) reported much better-than-expected third-quarter results yesterday afternoon (January year-end). Non-GAAP diluted earnings per share (EPS) were $0.54 vs. the consensus estimate of $0.43. Investors reacted by pushing the share price up about 8% since the market opened this morning.
By the way, Charles Schwab is reporting quarterly EPS of $0.43, which is clearly an error or a typo. It’s not uncommon to see the wrong numbers reported during earnings season, so when in doubt, go straight to the company’s earnings press release. That’s where the news media get their numbers from. If the human who plucks the number from the press release is confused (or hungover!), they can easily grab the wrong number from the press release. This is unfortunately not a rare occurrence.
Back to GameStop …
Same-store sales rose for the third consecutive quarter, worldwide omnichannel sales rose 38.6% vs a year ago, hardware sales rose 8.8%, software sales rose 5.4% and collectibles sales rose 26.5%. Technology brand sales fell 10.2%, affected by the delay in new iPhone shipments. New products that are contributing to third- and fourth-quarter successes include Nintendo Switch, Microsoft Xbox One X and Apple’s iPhone X.
I think it’s safe to say that the worst is over for the share price, although there will certainly be tax-loss selling until year-end that will inhibit any sustained upward moves. Come January, I think there will be very little risk remaining in the share price. Buy GME now. Buy.