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GameStop shares fell 20% on Friday after the video game retailer said it plans to sell additional shares and announced preliminary results that showed a decline in first-quarter sales.
In a new regulatory filing, the video game retailer said it will sell up to 45 million Class A common shares in an at-market offering. The sale comes after GameStop shares rose earlier this week in a brief rebound in meme stock trading.
Meanwhile, in a separate statement, GameStop said it now expects first-quarter net sales to range from $872 million to $892 million, down from about $1.24 billion in the same quarter last year. Two analysts surveyed by FactSet said they expect first-quarter revenue to be about $1 billion.
GameStop’s net loss in the first quarter is expected to be between $27 million and $37 million, which is less than a net loss of $50.5 million in the same period a year earlier. The brick-and-mortar company has been grappling with competition from e-commerce-based rivals. In late March, GameStop announced an unspecified number of job cuts to cut costs.
The rally in GameStop this week appears to be driven in part by posts on on Tuesday, up more than 200% from the May 10 close.
The rally faded later in the week, with GameStop falling sharply on Wednesday and Thursday. Shares closed Thursday at just $27.67, down more than 50% from their highs during the week. Net inflows from retail traders were well below the amount seen during the trading frenzy three years ago.
Michael Pachter, a Wedbush analyst who covers GameStop, said GameStop is not in a position to turn a profit.
“They took in $6 million last year and burned through the money,” Butcher said. “We expect them to lose $100 million a year going forward. It’s a race to see if they can close stores quickly enough to limit losses, but they don’t have a plan that suggests they can increase revenue or profits, and their core business is declining.”
Pachter has an Underperform rating on GameStop and a $5.60 price target.
— CNBC’s Jesse Pound contributed reporting.
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