The Worst Stock to Buy on Wall Street Right Now

NYSE: GME | GameStop Corporation News, Ratings, and Charts

GME – Specialty retailer GameStop (GME) recently announced a partnership with FTX US, which seems to have buoyed its stock. However, given its bleak fundamentals, it could be wise to steer clear of this popular meme stock. Read on….

Specialty retailer GameStop Corp. (GME) is a game and entertainment products provider operating through its various stores and e-commerce properties. The company sells new and pre-owned gaming platforms, accessories, new and pre-owned gaming software, and in-game digital currency.

Recently, GME announced its partnership with FTX US to increase its presence in the cryptocurrency space following its launch of an NFT marketplace. The company is expected to start selling FTX gift cards at some of its stores. However, Wedbush analyst Michael Pachter believes its FTX partnership “is unlikely to yield meaningful revenue or profit.”

The stock has declined 38.6% over the past year and 21.2% year-to-date to close its last trading session at $29.24. However, it has gained 16.2% over the past five days.

Here are the factors that could affect GME’s performance in the near term:

Bleak Financial Growth

For the fiscal second quarter that ended July 30, GME’s net sales decreased 4% year-over-year to $1.14 billion. Adjusted operating loss rose 106.6% from the prior-year quarter to $106.20 million. Adjusted net loss and adjusted loss per share rose 94.7% and 84.2% from the same period the prior year to $107.10 million and $0.35.

Stretched Valuations

In terms of its forward EV/Sales, GME is trading at 1.35x, 20.2% higher than the industry average of 1.12x. The stock’s forward Price/Sales multiple of 1.40 is 54% higher than the industry average of 0.91.

Negative Profit Margins

GME’s trailing-12-month gross profit margin of 21.06% is 42% lower than the industry average of 36.32%. Its trailing-12-month net income margin and levered FCF margin of a negative 8.57% and 11.50% are significantly lower than their respective industry averages of 5.86% and 1.54%.

The stock’s trailing-12-month ROE, ROTC, and ROA of negative 32.51%, 13.88%, and 18.56% compare with the industry averages of 15.28%, 7.01%, and 5.14%.

POWR Ratings Reflect Bleak Prospects

GME’s POWR Ratings reflect this bleak outlook. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

GME has an F grade for Value, consistent with its high valuations.

The stock has a Growth and Quality grade of D in sync with its bleak bottom line growth in the last reported quarter and its bleak profitability margins.

In the 46-stock Specialty Retailers industry, it is ranked last.

Click here to see the additional POWR Ratings for GME (Momentum, Stability, and Sentiment).

View all the top stocks in the Specialty Retailers industry here.

Bottom Line

It looks uncertain whether the FTX partnership would yield significant revenue for GME. On top of it, GME’s bleak bottom-line positioning is worrisome. Moreover, analysts expect its EPS to decline 20.2% year-over-year in the current fiscal year. Hence, I think the stock might be best avoided now.

How Does GameStop Corp. (GME) Stack Up Against its Peers?

While GME has an overall POWR Rating of F, one might consider looking at its industry peers, TravelCenters of America Inc. (TA) and The ODP Corporation (ODP), which have an overall A (Strong Buy) rating, and NEXT plc (NXGPY) and Canadian Tire Corporation, Limited (CDNAF), which have an overall B (Buy) rating.


GME shares fell $0.18 (-0.62%) in premarket trading Tuesday. Year-to-date, GME has declined -21.18%, versus a -12.83% rise in the benchmark S&P 500 index during the same period.


About the Author: Anushka Dutta


Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
GMEGet RatingGet RatingGet Rating
TAGet RatingGet RatingGet Rating
ODPGet RatingGet RatingGet Rating
NXGPYGet RatingGet RatingGet Rating
CDNAFGet RatingGet RatingGet Rating

Most Popular Stories on StockNews.com


:  |  News, Ratings, and Charts

Updated: Bear Market Game Plan!

Please do not assume this bear market is over. History provides many lessons on how bear markets work and thus why the S&P 500 (SPY) could easily fall another 20% or more from current levels. That is the past. Now we need to focus on the future like how low the stocks will go...and the best trades to stay on the right side of the market action. All that and more is in Steve Reitmeister updated “Bear Market Game Plan”. Read on below for more...

:  |  News, Ratings, and Charts

2 Stocks Under $50 Worth Snapping up Right Now

With the market volatility and odds of recession perpetually increasing with every interest rate hike by the Federal Reserve, investors would be advised to load up on attractively priced stocks of businesses with robust demand and stable growth trajectory. Hence, fundamentally sound stocks Kroger (KR) and APA (APA), currently trading under $50, could be ideal investments. Keep reading…

:  |  News, Ratings, and Charts

3 Stocks You'll Want to Leave out of Your Retirement Portfolio

The stock market is experiencing wild swings amid the consecutive Federal rate hikes and deteriorating investor sentiments. Moreover, the aggressive rate hikes are raising recession concerns. Therefore, fundamentally weak stocks Uber Technologies (UBER), Workhorse Group (WKHS), and AppHarvest (APPH) might be best avoided for your retirement portfolio. Also, these stocks do not pay dividends. Read on…

:  |  News, Ratings, and Charts

The Worst Stock to Buy During Times of High Inflation

Rent the Runway (RENT) is slated to cut its workforce by 24% in the face of declining consumer spending amid soaring prices. Its subscriber count dropped in the last quarter. The stock has lost more than 70% year-to-date. Given the stubbornly high inflation, RENT might be best avoided. Keep reading…

:  |  News, Ratings, and Charts

3 Stocks You'll Want to Leave out of Your Retirement Portfolio

The stock market is experiencing wild swings amid the consecutive Federal rate hikes and deteriorating investor sentiments. Moreover, the aggressive rate hikes are raising recession concerns. Therefore, fundamentally weak stocks Uber Technologies (UBER), Workhorse Group (WKHS), and AppHarvest (APPH) might be best avoided for your retirement portfolio. Also, these stocks do not pay dividends. Read on…

Read More Stories

More GameStop Corporation (GME) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All GME News