All eyes are on GameStop (NYSE:GME), as the video game retailer announced it will report third-quarter earnings on Dec. 7 after the market close. Investors in GME stock are expecting improvements in profitability, as management has stated they will focus on cutting costs during the second half of the year. That includes cash compensation reductions and corporate layoffs. Since 2021, the company has added 600 new corporate hires.
Meanwhile, retail investors have been calling for a short squeeze. However, the large number of GME shares held directly through the Direct Registration System (DRS), or through transfer agents, may put a stop to that. Through the DRS, investors can own shares of GME without the assistance of a broker. More importantly, shares held through the DRS cannot be lent out to short sellers. It’s estimated that 70% of outstanding shares are held by individual investors, while 40% of retail GME shareholders have registered their shares with the DRS.
S3 Research analyst Ihor Dusaniwsky added:
“The vast majority of GME short selling has already been done, existing short sellers will be able to add some more exposure to their positions and new short sellers may enter the trade – but there is not enough stock borrow available to execute large short trades in the stock.”
With that in mind, let’s take a look at what Q3 earnings have in store.
For the quarter, analysts are expecting revenue of $1.35 billion, up 4.5% year-over-year (YOY). The low estimate is $1.3 billion, while the high is $1.41 billion. For earnings per share (EPS), analysts are forecasting a loss of 28 cents compared to a loss of 35 cents a year ago. The low EPS estimate is a loss of 35 cents, while the high is a loss of 23 cents.
In terms of guidance, analysts expect revenue of $2.4 billion, up 6.4% YOY, and an EPS loss of 23 cents for the following quarter. That would bring total revenue for the year to $6.27 billion, up 4.3% YOY, and the EPS loss to $1.37.
It’s been almost two years since GameStop’s historic rise in January of 2021, but loyalty behind the stock still seems to be holding strong. Third-quarter earnings will surely lend a signal as to whether the “Kardashian economics” of the company can keep up.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Eddie Pan specializes in institutional investments and insider activity. He writes for InvestorPlace’s Today’s Market team, which centers on the latest news involving popular stocks.