Mar 23, 2021 - Economy

GameStop's moment of truth

Data: FactSet; Chart: Axios Visuals
Data: FactSet; Chart: Axios Visuals

There's been a deafening silence from GameStop since the company's stock took Reddit boards — and the world — by storm. That will change on Tuesday.

What's happening: Executives will release quarterly earnings and speak publicly to Wall Street for the first time since a Reddit-fueled rally caused a historic surge in its stock price.

The big question: Whether the saga translates into anything that helps the company overcome the hurdles that threaten its survival.

  • So far, GameStop has sat out the hype.
  • Unlike AMC (another company in the meme stock cohort), it hasn't used the newfound market enthusiasm to raise money that could fund turnaround ambitions.
  • Of note: Since the Reddit saga, its CFO, who's been applauded by Wall Street for helping firm up the company's balance sheet, resigned.

Storm clouds: The company's main business — selling physical games in physical stores — has been decimated by digitization.

  • Thought bubble from Axios Gaming correspondent Stephen Totilo: Selling boxed games is a fading market as people switch to downloading. Selling gaming hardware has very low margins — and GameStop's big business plan last year was to turn stores into hangout spaces, which ran afoul of COVID-19.

What to watch: The company has said in recent weeks that it's moving to catch up to the times, with Chewy co-founder Ryan Cohen taking the lead. But those plans remain vague.

  • "In theory, [GameStop] could raise cash and buy an esports player, buy a steaming service, buy a company that produces games," longtime analyst Joe Feldman tells Axios — all things that could help it compete.
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