Gamestop (NYSE:GME), the video gaming chain, reported a large loss for its most-recent quarter. But GME stock rose overnight on its deal with crypto trading firm FTX.
The company lost $108.7 million, or 36 cents per share, for the three months ending in July on revenue of $1.14 billion. The loss was 75% higher than last year’s $61.6 million, or 21 cents per share, and revenue was below the last year’s $1.18 billion.
However, the stock was up about 4% in pre-market trading thanks to the aforementioned partnership, under which stores will carry FTX gift cards and become its “preferred retail partner in the United States.” GME stock opened today at about $24 per share with a market cap of $7.3 billion.
What’s Going on With GME Stock
Gamestop CEO Matt Furlong said that, over time, the FTX deal will support the GameStop Wallet, an app allowing trading of crypto and NFTs, which is the linchpin of its “tech-centric” strategy.
Gamestop was the leading meme stock of 2021. Chewy (NYSE:CHWY) co-founder Ryan Cohen led a charge by small traders into control of the company, where he is now chairman. FTX is the third-largest crypto trading firm, with over $1.6 billion in trading volume on a typical day.
The deal is also notable because Cohen and Sam Bankman-Fried, the billionaire founder of FTX, are in their 30s. Thus, at least when it comes to age, there is some overlap among FTX and Gamestop customers. Investors hope it will turn video gamers into crypto trading enthusiasts.
But others will point out Gamestop had negative cash flow of $126 million last quarter, and that total cash is now below $1 billion. It was $1.78 billion at the end of July 2021. There have been 12 analyst reports on Gamestop this month, with most suggesting investors just hold the stock.
During the height of the meme stock trend, Gamestop sold at more than $80 per share. It is now down 37% for 2022, but investors who bought in 2020 still have gains of 600% to 800%.
What Happens Next?
The second quarter was Gamestop’s sixth straight quarterly loss. But GME stock will remain strong so long as small investors support it and cryptocurrency remains viable. Despite some hard falls in 2022, the crypto market is still worth nearly $1 trillion.
On the date of publication, Dana Blankenhorn held no positions in any companies mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.