GameStop Shares Rise on Record Quarterly Profit, $2B Buyback Authorization

GameStop (GME) shares climbed on Wednesday after the video game retailer reported record quarterly earnings and unveiled a $2 billion share repurchase program, even as its recent attempt to acquire eBay failed to gain traction. The stock rose 6.12% to $22.21 after the company posted what it described as the highest quarterly net income in its history and its strongest first-quarter operating profit on record. GameStop reported first-quarter net income of $389.6 million, or 66 cents per share, compared with $44.8 million, or 9 cents per share, in the same period a year earlier. Revenue increased 14% year over year to $835.3 million from $732.4 million, with growth driven primarily by strength in the collectibles business. Adjusted net income, which excludes impairments, gains on digital assets and related receivables, unrealized gains on derivative assets, and certain other items, climbed to $179.3 million from $73 million a year ago, or 30 cents per share on an adjusted basis.

The latest results suggest GameStop's ongoing efforts to diversify beyond traditional video game retailing are gaining momentum, which is one way to describe a business leaning hard into trading cards while the rest of the industry debates whether discs are still a thing. The company attributed the year-over-year sales growth largely to its collectibles segment, an area it has increasingly emphasized as physical game sales across the industry have come under pressure. Operating income reached $143.3 million, marking the company's strongest first-quarter operating performance on record. The earnings report landed despite limited Wall Street coverage of the company, because apparently some analysts still have day jobs.

Alongside the earnings release, GameStop announced that its board had approved a new $2 billion stock repurchase authorization. The program will remain in effect through June 2, 2029, replacing a previous authorization established in March 2019. Share buyback programs typically reduce the number of shares outstanding and can provide additional support for earnings per share over time, though the memestock crowd may have other theories. The announcement added to positive investor sentiment following the stronger-than-expected profitability and revenue growth reported for the quarter.

The earnings release follows GameStop's recent attempt to acquire eBay in a transaction valued at approximately $56 billion in cash and stock. Late last month, eBay said its board and independent advisers had reviewed the proposal and rejected it, citing uncertainty surrounding financing, leverage, and the leadership structure of a combined company. Despite the rejection, GameStop subsequently disclosed that it had increased its ownership stake in eBay to 6.55% of outstanding shares, up from roughly 5%. The retailer has also recently asked shareholders to approve an increase in its authorized share count as well as a 100% performance-based option award for Chief Executive Officer Ryan Cohen. While the proposed acquisition did not move forward, GameStop's latest results and substantial buyback authorization shifted investor attention back toward the company's improving financial performance and evolving capital allocation strategy, which is a polite way of saying the chart watchers have something to look at again.