• February 5, 2023

GameStop’s earnings whiff — but retail traders faithful even as ‘Roaring Kitty’ points to $2 million paper loss

After an initial spike, investors in Wall Street’s most popular meme stock were struck down with a dose of reality on Tuesday.

GameStop
GME, -6.55%
lagged behind the analysts Earnings and earnings per share estimatesWhile the Wall Street pros were more than prepared to sniff, GameStop fanatics on social media seemed ready to celebrate everything the brick and mortar company delivered to turn the fourth quarter profit call into the financial equivalent of a virtual one to transform Coachella.

Interest in GameStop comes after a rapid start into 2021, fueled by individual investors who joined the belief that Chewy Inc.
YOU, -1.39%
Co-founder Ryan Cohen would lead to a major overhaul of the company’s business model.

The company said Tuesday it “strengthened” its balance sheet and closed the year with $ 635 million in cash “to lay the foundations for transformation.”

And while changes can come, GameStop executives also appointed the new operations chief, the former Amazon.com Inc.
AMZN, + 0.86%
Executive Jenna Owens, as part of a broader turnaround effort – she couldn’t come fast enough to justify her $ 12.6 billion market value, some Wall Street analysts say.

The upside in terms of the stock peaked in late January. At that point, GameStop shares were up 930% year-to-date, causing losses for hedge funds and other investors who fail to bet timely that stocks will lose value. The stock has cooled its spike since then, but is still 865% year-over-year as of Tuesday’s close of trading, according to FactSet data.

Almost half an hour before GameStop’s quarterly Tuesday afternoon call even began, the Texas-based video game retailer was overwhelmed by the tremendous interest, and potential attendees were banned from the event due to the high volume of calls. ins.

That reality made Reddit users happy, and many were delighted when a CNBC anchor admitted on live television that they couldn’t dial in.

“The anchor said she was never able to get a winning call,” one user posted on r / WallStreetBets. “Lmao.”

However, it wasn’t long before that celebratory atmosphere, in which GameStop stock initially rose 11% in over-the-counter trading, gave way to whiplash as trading outside of company hours showed a double-digit loss on Wednesday. That decline sparked speculation that retailers’ favorite enemy, hedge fund short selling, was at work.

“I think Hedgies held onto the short stocks that were used after the earnings report to create the impression that people were panicking,” speculated another poster. “I think that’s why the price has been so constant over the last week and the volume has been so low. You waited for the right moment to act. “

Indeed, when the call for winners came to an end, the mood was dark. Until the patron saint of GameStop hodlers, Keith Gill, aka Roaring Kitty, aka DeepF @ # $ ingValue, issued his first Reddit letter in more than two weeks – a screenshot of his trading account that revealed he had lost alone on Tuesday at GameStop nearly $ 2 million, up nearly $ 24 million from last year.

The tweet was synonymous with a rallying cry for believers to hold the line despite the decline.

“He knows how to schedule these posts,” praised one of Gill’s followers.

“No kidding, he probably saved all of $ 20 a share for this post alone,” replied another.

But even the Roaring Kitty would have to admit that at the end of the day it was an ugly one for everyone’s favorite.

In its last review on Tuesday, GameStop shares fell over 15%, with around 4 million shares changing hands after the close of business.

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