According to Bespoke data, the stock has dropped by double digit percentage points the day after earnings in each of the last four quarters. The stock dropped 27 percent the day after the company’s first-quarter report in June, which exceeded analyst expectations. When the embattled video game retailer missed earnings estimates in the previous quarter, the stock dropped nearly 34%.
During its last six quarterly updates, GameStop has not provided guidance as it determines its brick-and-mortar presence in a world dominated by e-commerce. This has made assessing the company’s turnaround strategy difficult for Wall Street analysts and investors alike.
Chewy co-founder Ryan Cohen was named chairman of the board earlier this year, with plans for him to lead the company’s online efforts. However, no clear strategy has emerged thus far.
“As GameStop’s board continues to shuffle the management deck, the goal of transforming into a ‘technology’ company that delights gamers remains mostly a mystery, especially as the video game industry accelerates the shift toward downloads, streaming, and cloud services,” Baird analysts said in June after the company’s most recent results.
According to Pete Najarian, co-founder of MarketRebellion.com, traders are expecting a more than 10% move following GameStop’s earnings based on activity in the options market.
Since January, when a new class of retail investors piled into the name, bidding shares higher at the expense of some Wall Street heavyweights who were short on the other side, the once-sleepy name has captivated the Street.
Since then, the company has become the face of the so-called “meme-stock frenzy.”
The post-earnings swings are significant, but not out of character for a stock that has been known to be volatile even in the absence of obvious catalysts.
Looking at the company’s 77 previous quarterly updates, the average post-earnings move has been a 3.05 percent decline, according to Bespoke.
During premarket trading, shares rose slightly, gaining about 1% to around $201.
The stock has fallen nearly 9% so far this month, but it is still up 956 percent in 2021. Despite the fact that the stock has risen in value, many on Wall Street remain skeptical.
“There isn’t anything that GameStop is likely to report in its second-quarter financial results on Wednesday that would justify the stock’s current market capitalization of about $14.5 billion,” said David Trainer, CEO of investment research firm New Constructs.
“We believe GameStop shares are trading on meme stock momentum, and the stock’s valuation is completely disconnected from fundamentals. We believe the stock price would be closer to $30 per share if it was trading on fundamentals,” he added.
Analyst Andrew Charles raised his price target on the restaurant stock to $2,250 from $2,080 in a note to clients on Wednesday, citing the company’s digital push as a reason for higher profit margins than Wall Street expects.
“We anticipate that digital sales will drive the majority of sales growth in 2021-24E… Given the convenience of digital ordering, we remain confident in the stickiness of high-margin, data-rich digital sales,” the note said.
According to FactSet, the new target is 18.7 percent higher. Cowen also recommends Chipotle.
Chipotle, like many other restaurants, saw a surge in digital sales and takeout during the pandemic. Chipotle’s adaptability should help it perform well even as the pandemic remains uncertain, according to Cowen.
“We argue that Chipotle’s ‘omnichannel’ presence, which includes a 25% digital carry-out mix of sales and a 24% third-party delivery mix, positions sales to outperform whether the reopening narrative is faster or slower,” the note said.
Chipotle’s stock is up more than 36% year to date, with the majority of that increase occurring since the end of May.
“The price increase suggests that overall demand growth will remain strong. During our Supply Chain Day conference calls [held on August 19], we discussed… “TSMC was confident in delivering revenue CAGR [compound annual growth rate] close to 15% over the next five years,”.
As a result, Goldman increased its earnings-per-share estimate for TSMC by 3% for 2021 and 15.8 percent for 2023, while maintaining its buy. EPS is a critical metric used by traders to determine the worth of a stock.
“We maintain our constructive view on the industry’s underlying structural growth areas (such as 5G/AI), TSMC’s solid technological leadership and execution, an easing competitive landscape, and long-term shareholder returns,” the analysts wrote. TSMC is also on the bank’s list of convicted companies.
TSMC, a foundry that manufactures chips for other companies, was named Asia’s most valuable company last month, with a market capitalization of more than $500 billion as a global semiconductor shortage boosted demand.
Goldman also raised its earnings per share (EPS) estimates for UMC, a second-tier foundry, by 1.7 percent for 2021 and 18 percent for 2023.
“Given our unchanged positive view on UMC’s structural profitability improvements and an implied TP [12-month target price] upside of 70%,” the analysts stated. UMC is also on Goldman’s list of convictions, and the bank anticipates that it will raise its prices.
In addition, the bank reiterated its buy rating on Vanguard, another second-tier foundry. It reduced its EPS forecast for 2021 by 0.6 percent but increased it by 17.9 percent for 2023.
The analysts stated, “Vanguard has a good track record of solid execution.” “We believe that trading at a slight premium to UMC and a discount to TSMC is reasonable.
Analyst Doug Anmuth raised his price target on Netflix from $625 to $725 per share in a note to clients on Wednesday, saying that the company’s upcoming content slate should help drive sign-ups after a dramatic slowdown earlier this year.
“We continue to like NFLX shares as the year progresses due to the strength of the 2H content slate, greater distance from pandemic pull-forward, stronger seasonality, and the significant global secular streaming opportunity,”.
JPMorgan mentioned new seasons of “Money Heist” and “Lucifer” in September, as well as “Seinfeld” coming to the service in October.
The company added only 1.54 million net global paid subscribers during the second quarter. According to JPMorgan, the company appears to be on track to meet its 3.5 million third-quarter guidance.
“While data through August tracks to 2.7M net adds, we expect engagement to improve further through September as the content slate improves, NFLX gains more distance from COVID-related pull-forward, and the company enters a more favorable seasonality period,” according to the note.
Netflix shares have underperformed the broader market in 2021, rising about 12% year to date. However, the stock has recently gained traction, rising 17 percent since the end of July.
Dennis Lam and Byron Lam of DBS Group Research stated in an early September note that the Hong Kong market is “generally trading at a low valuation.” The city’s Hang Seng index was down more than 3% for the year as of Tuesday’s close.
“The never-ending regulations and state-owned media commentary in various industries, including technology, entertainment, healthcare, and living, have resulted in a technical bear market in Hong Kong,” the analysts said. Meanwhile, dovish Federal Reserve taper discussions in the United States have sent the market to new highs, widening the gap with Hong Kong.
“We agree that regulatory risks warrant a discount on the HK market, but everything comes at a cost,” they said. “Given that the market is already well aware of the approximate scope of regulatory scrutiny, we believe the market’s sensitivity to this news will be reduced.”
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Analysts believe that uncertainties in China’s technology sector, which has been under regulatory scrutiny for months, are dissipating. Shares of tech behemoths such as Meituan and Tencent fell briefly in August before recovering to finish the month higher, up 15.8 percent and 0.46 percent, respectively.
DBS analysts said the company’s stock price began to rebound within a month or two as more details emerged, citing a 2018 crackdown on Tencent’s video game approvals.
“Despite the increased scrutiny this time, we believe the same pattern will emerge. Bottom fishers are waiting in the wings, and risk appetite for technology companies is likely to improve once clearer rules and regulations are implemented,” they said.
Tencent and fellow tech behemoth Alibaba are two Chinese tech stocks on DBS’s list of top buys. DBS assigns a buy rating to small-cap stocks that are expected to return more than 15% over the next 12 months, or more than 10% if they are large-cap stocks.
Analysts believe Tencent’s regulatory risk has likely decreased as a result of the recent implementation of rules limiting the number of hours people under the age of 18 in China will be allowed to play online video games.
Meanwhile, Alibaba replaced Meituan on the list due to the two stocks’ “divergent performance” in the previous month, with the former dropping more than 12% in August compared to the latter’s nearly 16 percent surge.
Other stocks on the list of best buys include papermaker Nine Dragons Paper, which DBS expects to report strong earnings in late September, which will help support its share price. Guangzhou Automobile Group is the bank’s pick in the auto sector, and Country Garden Services and Ping An Insurance have also been added to the overall list of top picks.