GameStop reverses losses and trades 6% higher after earnings reveal surprise loss in the holiday season

• GameStop fell as much as 10% to the lower bound of its meme-stock price range after reporting Q4 earnings results.
• The company revealed a surprise loss during the holiday season as video game console sales slowed.
• GameStop stock is down 83% from its record high of $483 per share seen during the January 2021 short-squeeze.

GameStop has exited the hype phase and is now in the execution phase as the video-game retailer attempts to stage a turnaround led by its chairman, Ryan Cohen.

That scenario became apparent on Friday when the stock fell as much as 10% after less-than-stellar fourth-quarter earnings results. The stock then reversed those losses and traded up as much as 6% in early Friday trades.

The company beat revenue estimates but reported a surprise loss for the quarter as video game console sales decelerate following a surge in sales amid the COVID-19 pandemic.

Here were the key numbers:

Revenue: $2.25 billion, versus analyst estimates of $1.95 billion
Adjusted earnings per share: -$1.86, versus analyst estimates of $0.84
PowerUp Rewards Pro Members: 5.8 million, representing year-over-year growth of 32%

Video game sales overall have been decelerating from the pandemic peak over the past few months, with a decline in console sales hurting GameStop the most. Hardware and accessories sales represented 52.7% of total sales for GameStop, a decline from the 54.8% a year ago.

While demand for video games is not as high as it was when much of the country was in lockdown, supply chain constraints impacting the Sony's PS5 and Microsoft's Xbox Series S consoles also put pressure on sales.

GameStop is moving ahead with a transformation strategy into a specialized e-commerce retailer focused on video games, accessories, and digital products. During the fourth-quarter, GameStop launched a partnership with Immutable X to develop and launch GameStop's NFT marketplace.

But the allure of operating a NFT marketplace may have lost some of its luster over the past few months as sales in the digital art space steadily decline from their peak.

Despite GameStop's fourth-quarter loss of almost $150 million, the company had more than $1.2 billion in cash and nearly $1 billion in inventory at the end of its fiscal year. That's a big enough cash runway to fund the company's turnaround endeavours for at least a few years, based on its FY 2022 loss of about $381 million.

GameStop stock is down 83% from its record high of $483 per share seen during the January 2021 short-squeeze. Cohen has a lot of work ahead in order to satisfy investors that bought in during those sky-high levels.