Mario Stefanidis, Vice President of Research at Roundhill Investments, joins Cheddar News' Closing Bell, where he explains why shares of GameStop soared on Wall Street despite mixed results. Stefanidis also breaks down GameStop's NFT plans, which the company is expected to launch over this summer.

Closing Bell

Shares of GameStop Soar Despite Mixed Earnings Results

Welcome back to closing bell here on cheddar news. So investors adding a meme favorite Gamestop back on their shopping list this afternoon after what's been a volatile 24 hours for the stock now. The video game retailer reporting a big miss on earnings posting a loss instead of the profit analysts were hoping for. In fact, Gamestop has been struggling to turn around the business and become more profitable. It also announced that it will launch an N. F. T. Marketplace by the end of the second quarter as it looks to diversify its revenue streams, but right now it's up nearly 9%. So joining us now is Mario, Stephanie says vice president of research at Round Hill investments in Mario, what changed between yesterday afternoon and today that shares are now rising so much. Yeah, and thanks for having me, ken, I think the first thing to realize is first and foremost, Gamestop is still a meme stock, you know, it's not necessarily trading on fundamentals, but more so on sentiment and um, an elevated beta to the rest of the market. So insofar as you know, the market has turned green today. Um, I think it makes sense that Gamestop is up versus some of the pessimism that we were seeing after hours yesterday. Uh, the N. F. T. News is encouraging though. Gamestop is partnering with immutable to launch a suite of N. F. T. S in Q. Two of this year. Um, but I don't know if that alone is enough to propel the stock by, you know, single digit market cap, single digit billion market cap today. What data did you find in game stops earnings. That was the most telling to where the company stands right now. Yeah, I think the most interesting thing is that the company has eliminated their long term debt. So via equity issuances, You know, at a pretty high price in the last few quarters, uh certainly higher than what we saw pre pandemic, where shares are still um 10-15 times higher. Despite the 70% drawdown from last February, the company was able to issue shares um dilute their equity and um use those proceeds to pay off their long term debt. So on a long term debt basis, game stops actually uh looking pretty good. The one thing they have to grapple with is their earnings. And you know, the negative 148 million loss this quarter was certainly a shock, especially since analysts were expecting a $60 million gain. Um But insofar as they can solve some of those problems in the medium term. Um The, you know, they're N. F. T. Marketplace and other potential offerings and gaming, uh their their their medium term future is looking brighter than it was. So Gamestop, like he said, they're going to launch an N. F. T. Marketplace. What should investors know what should consumers know about this? So I'll start with investors. The N. F. T. Marketplace. The marketplace for marketplaces is pretty competitive. Um You know, you have open C. That is by far the largest N. F. T. Marketplace um taking up a majority of the $25 billion N. F. T. Market. Um Then you have uh coin based that is launching launching a competitive offering. Um You have F. T. X. The crypto giant. Um So there are a lot of players and it's yet to be seen whether Gamestop and immutable partnership will reap rewards. Um Part of that will come with expanding the overall pie for N. F. T. S. We've certainly seen a deceleration in the last few months as broad investor sentiment has kind of waned. But as that market grows, we should see positive results for for for Gamestop and their partner immutable. Why is Gamestop still attracting so many of these apes or retail investors? Despite the fact that like you said fundamentally they're not the most sound. What is it about them? Is that the N. F. T. Marketplace is the fact they're moving to e commerce is the fact that they're having these pc components in their stores. What is it about the Gamestop stock that is still creating Simba's. Mhm. Yeah, I think ultimately the apes uh still subscribed to the same theories as last year that, you know, they're waging a war against institutions and against hedge funds and combating um these funds that are short by longing the stock and potentially causing squeezes uh causing them to lose, you know, large amounts of profit. Um The one thing there though is short interest has certainly come down and Gamestop, especially as hedge funds like Melvin Capital have pared back their short positions, the short interest has come down so that potential for a short squeezes and you know, all that there. And then at the same time you also have less retail investors participating uh in in in investing in speculative stocks like Gamestop and AMC. Uh If you just look on the Wall Street Bets forum for example, we've seen concurrent users fall from 1 to 200,000 last year down to about 10 to 20,000 during peak times. Uh This year. Now my last question for you, how do you evaluate game stops long term potential? So it's really important for them to execute on some of the goals that they've outlined. Uh last May when they announced the N. F. T. Marketplace. Uh They were pretty vague with the details. Uh And now we finally have clarity for the first time on this latest Q. Four earnings call. Um If they can become the one stop shop for gaming N. F. T. S. And carve out a niche separate from like what open C. Is doing with artwork and real estate. Um I think they could have long term success. But ultimately their core business, especially as it relates to buying physical games as well as trading in used games and selling them at a markup. That business is pretty much dead. Um The trade and business has twice the margins as the as the core business. And gamers aren't even buying physical games anymore, everything is digital. Um But also people are buying collectible titles now for higher price points and not trading those and so you kind of have that core business working against them, which is why it's so important for them to diversify into these higher margin efforts. My idea if we're just talking to the new Mario is that if you preorder with Gamestop instead of you having like an extra skin or something in the game, you get an exclusive N. F. T. To Gamestop to get folks from not buying on the PS market or the Xbox market. But that was just me, you know what I mean? Like I mean that's a great idea. That's a great idea though. You should uh you should write uh we'll see. We'll see now Mario, Stephanie Diaz, vice president of research at Round Hill Investments Mario, thank you as always for being on the show. Gamestop, call me. My phone's always on