Shares of GameStop Corporation (GME) are down more than 16% Wednesday morning after the company came in well short of expectations in the fourth quarter.

The video game retailer reported revenue of $1.79 billion, missing the analyst consensus of $2.05 billion by a wide margin. This was a big step backward year over year, too, from $2.23 billion this time last year. Adjusted earnings per share came in at 22 cents, which also missed the consensus estimate of 30 cents. 

This was despite the company’s efforts to improve profitability and cut costs through layoffs. GameStop cut 3,000 full-time salaried and hourly associates along with as many as 9,000 part-time hourly associates globally. Moreover, the company has officially ceased operations in Ireland, Switzerland, and Austria.

The top performing segment for the company was hardware and accessories sales, which were up 12% year over year to $1.09 billion. However, software sales tanked 31% to $465 million. 

The bigger issue for GameStop is long-term viability, as it’s becoming clear that customers don’t necessarily need brick-and-mortar stores with digital downloads becoming the preferred approach to buying video games. Consumers can purchase and download a game directly from their console or PC – why make the trip to the local GameStop if you don’t have to?

Wedbush analyst Michael Pachter spoke to this issue, stating that there’s not much likelihood that the company will be able to turn things around from a revenue standpoint unless management does something drastic to boost store traffic.

GME has had a tumultuous past few years. The stock reached a low of less than $1 per share in 2020 before being revitalized by the meme stock craze and resurging to $81/share. Since then, it’s been a steady fall back to reality. The stock sits at just $13 today, down 24% to start 2024.

This begs the question, is it officially time to cut losses or take whatever profits you’ve mustered and sell GME? We’ve dug a bit deeper into the VectorVest stock software and found 3 things to help you make your decision one way or the other.

GME Has Fair Upside Potential and Safety, But Poor Timing is Weighing it Dow

VectorVest empowers you to win more trades with less work and stress by delivering clear, actionable insights in 3 simple ratings. These are relative value (RV), relative safety (RS), and relative timing (RT).

Each sits on its own scale of 0.00-2.00 with 1.00 being the average, making interpretation quick and easy. It gets even better, though. You’re given a buy, sell, or hold recommendation based on the overall VST rating for any given stock at any given time. Here’s the situation for GME:

  • Fair Upside Potential: The RV rating compares a stock’s long-term price appreciation potential (forecasted 3 years out) to AAA corporate bond rates and risk. It offers far better insight than the typical comparison of price to value alone. GME has a fair RV rating of 0.86 right now, albeit a ways below the average. Even at this price, though, GME is still overvalued with a current value of just $4.94.
  • Fair Safety: The RS rating is a risk indicator computed through an analysis of the company’s financial consistency & predictability, debt-to-equity ratio, business longevity, sales volume, price volatility, and other factors. GME also has an RS rating of 0.86, which is fair - but again, quite a ways below the average and bordering on poor.
  • Poor Timing: The RT rating is based on the direction, dynamics, and magnitude of the stock’s price movement. It’s calculated day over day, week over week, quarter over quarter, and year over year. The biggest issue for GME is its poor RT rating of 0.67, reflecting a strong negative price trend pushing it lower and lower.

The overall VST rating of 0.79 is poor, and the stock is currently rated a HOLD. Learn more about this situation and what you should do next with a free stock analysis at VectorVest today!

Want These Types of Insights at Your Fingertips so You Can Win More Trades?

Use VectorVest to analyze any stock free. VectorVest is the only stock analysis tool and portfolio management system that analyzes, ranks and graphs over 18,000 stocks each day for value, safety, and timing and gives a clear buy, sell or hold rating on every stock, every day.

VectorVest advocates buying safe, undervalued stocks, rising in price. GME missed earnings on the top and bottom line by a wide margin, and there is concern that the company is operating on a dying business model. The stock has fair upside potential and safety, but poor timing is holding it back.

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