On Wednesday, GameStop Corp (NYSE:GME) shares declined by 5% after announcing its fiscal third-quarter results. The company reported its most recent quarterly results, Wednesday after markets closed, missing the consensus for analyst expectations on earnings per share.
GameStop posted FQ3 GAAP EPS of -$1.39 missing the average analyst estimate of -$0.58. On the other hand, revenue for the quarter increased by 30% from the same quarter in 2020 to $1.3 billion, surpassing the consensus Street expectation by $110 million.
GameStop’s FQ3 inventory increased to $1.141 billion from $861 million reported the same quarter a year ago, contributing to the earnings miss.
GameStop’s financial position remains solid with cash and cash equivalents of $1.413 billion and a low-interest, unsecured term loan of $46.2 million.
Should you bet on growth?
From a valuation perspective, GameStop shares trade at a steep forward P/E ratio of 1181.29, thus making the stock too expensive for bargain hunters.
However, analysts expect its earnings per share to increase by 37.80% this year, before spiking by more than 104% next year.
Therefore, GameStop could gain the attention of long-term growth investors.
Source – TradingView
Technically, GameStop shares seem to be trading within a sharply descending channel formation in the intraday chart. As a result, the stock has plummeted closer to the oversold conditions of the 14-day RSI.
Therefore, investors could target technical rebounds at about $201.33, or higher at $225.42. On the other hand, if the decline continues, GameStop could find support at about $144.82, or lower at $121.18.
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