Retail investor "leader" boosts GameStop's stock price, but his optimistic forecasts have not yet materialized

According to the Zhitong Finance and Economics APP, American retail investor "Roaring Kitty" Keith Gill, who once led the "retail investors vs. Wall Street" movement and sparked a frenzy in GameStop (GME.US) stock price, returned to social media last month, triggering a rally in meme stocks including GameStop.

Keith Gill, whose username is "Roaring Kitty," only needs to post information on social media to cause significant fluctuations in GameStop's stock price. After Keith Gill returned to social media on May 14th, GameStop surged nearly twofold in the following two days, but then gave back most of the gains. On June 3rd, Keith Gill shared a screenshot of his securities account holding GameStop positions, leading to a 21% increase in GameStop's stock price that day.

However, based on the financial data disclosed by GameStop, Keith Gill's optimistic forecasts for the company in the summer of 2020, such as the recovery in sales and profitability, have not been sustained. These forecasts are key factors supporting Keith Gill's arguments and investor enthusiasm. Wedbush analyst Michael Pachter said, "Keith Gill had some really thoughtful ideas in 2020, and they were absolutely accurate." However, the analyst who has been researching GameStop for over 20 years added that the company's core business is now facing increasing challenges.

Optimistic Forecasts Unfulfilled

It is reported that in 2020, Keith Gill predicted that GameStop's sales and profits would increase, and the company would adopt a transformational business strategy based on cultivating a player community. At that time, Keith Gill predicted that the threat of digital game downloads to GameStop's retail business was "overstated," and the industry's transition to digital seemed to be slower than what those bearish on GameStop were concerned about.

These forecasts seem to have not materialized. Michael Pachter pointed out that since 2020, the physical game software sales market has rapidly declined. Game analytics company Newzoo stated last month that the game market has almost completely moved away from physical sales.

Four years ago, Keith Gill also predicted that the "GameStop Reboot" plan by then-CEO of GameStop, George Sherman, would reshape the company into a leading gaming hub. It is reported that GameStop launched 12 concept stores in the fall of 2019, including interactive gaming spaces. This was also one of Keith Gill's arguments. In February 2021, Keith Gill reiterated his optimistic view, stating that GameStop "has a unique opportunity to pivot to a technology-driven business by embracing the digital economy." However, after the pandemic and disappointing financial performance, GameStop has ceased providing updates on its concept stores Keith Gill also predicted that starting from the second half of 2020, GameStop's profitability would significantly improve. However, the financial data released by GameStop showed that the company incurred a net loss of $215 million, $381 million, and $313 million in the fiscal years 2020, 2021, and 2022 respectively. Nevertheless, due to cost-cutting measures, the company turned a profit in the fiscal year 2023, achieving a net profit of $6.7 million.

Keith Gill was also optimistic about GameStop's revenue growth. Despite GameStop's revenue reaching $5.09 billion in the fiscal year 2020 and increasing to $6.01 billion in 2021, the company's revenue declined to $5.93 billion in the fiscal year 2022.

Nearly four years have passed, and despite most of Keith Gill's key predictions not materializing, he remains positive. Furthermore, fueled by retail investors' enthusiasm, GameStop's stock price has surged significantly, enabling the company to raise funds. The company announced on Tuesday that it raised $2.14 billion through the fourth sale of 75 million shares. Michael Pachter stated that GameStop's stock sales generated a substantial cash buffer, with the cash expected to generate $100 million in interest income annually.

Renowned short seller Andrew Left from Citron Research announced on Wednesday that he closed his short interest position in GameStop due to the company's fundraising activities. However, he expressed skepticism about the company's fundamentals