GameStop is betting big on its digital asset strategy as traditional gaming sales slow, but its cash burn rate is raising analysts’ concern.
GameStop (GME) shares edged lower Wednesday ahead of the video game retailer’s, and meme-stock favorite’s, second quarter earnings after the closing bell.
Analysts expect GameStop to be firmly in the red for the sixth consecutive quarter, with a bottom line loss of 38 cents per share for the three months ending in July. Group revenues, however, are expected to rise 7.3% from last year to $1.266 billion.
GameStop, which is hoping to transition from a reliance on brick-and-mortar sales to a larger and more dynamic presence online, has slashed its headcount in order to minimize the cash burn required to build-out its non-fungible tokens, or NFT marketplace following a tie-up earlier this year with Australian blockchain startup ImmutableX.
It also fired its CFO, Michael Recupero, and unveiled a four-for-one stock split in early July.
New Constructs analyst David Trainer estimates GameStop has burned through around $263 million in free cash flow over the twelve months that ended in April, GameStop’s fiscal first quarter, a rate that could only last for another 18 months if continued at a similar pace.
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