generic GameStop’s NFT Pivot Is an Act of Desperation, Not Innovation
I’m guessing GameStop (NYSE:GME) stock fans will claim that the company’s newest pivot into NFTs (non-fungible tokens) is something others “just don’t get.” I’ll admit it, I don’t get it. And I certainly don’t think that the move will vault share prices to their former highs.
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But I do think that it will give meme stock fans and backers on Reddit’s r/WallStreetBets more to talk about in connection to GameStop. So, it could logically send prices higher. But I don’t think rational investors should pay much attention to it at the same time. GameStop was, and remains unworthy of your investment.
That said, let’s unpack the NFT news.
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GameStop’s NFT Marketplace
GameStop announced that it had formed a partnership with Immutable X on Feb. 3. Immutable X is an upstart Australian blockchain firm. The purpose of the partnership is for the two companies to collaborate in order to develop an NFT marketplace.
As explained in a recent Barron’s article: “The partnership establishes a fund of up to $100 million in Immutable X’s IMC tokens, which the companies will use as grants for NFT creators. IMC tokens, or i Money Crypto, are a blockchain-base cryptocurrency.”
The news follows an announcement in early January that GameStop hired more than 20 people to run its NFT business and to establish cryptocurrency platforms. The direction of the pivot is clear: GameStop will attempt to rebrand itself from a flagging video game retailer to one more aligned with the fledgling, unproven NFT industry.
Both pieces of news related to NFTs have done little to stop a prolonged slide in GME stock that began in late November.
Prices have declined from $250 to below $100 during that period. It prompts the question: Do you think NFTs and crypto can save the company? It’s a really big pivot, after all. My gut instinct is that it’s incredibly difficult to ascertain much from the recent news. Investors certainly can’t tell much about how the moves will affect GameStop’s business fundamentals. But that’s where we need to look to understand why GME stock holds little appeal.
The Shaky Fundamentals of GME Stock
One of the few bright spots for GameStop is that it did post increasing revenues when it released earnings on Dec. 8. Revenues hit $1.297 billion, up 29% from the $1.005 billion a year earlier. Unfortunately, it didn’t really matter much. The bigger issue is that the company’s losses are spiraling out of control. Net losses reached $105.4 million in the quarter, up from an $18.8 million loss a year before.
If you’re keeping track, GameStop released earnings, which sent it downward. Then it hinted at NFT pivot, which also sent it downward. And then it announced the development of an NFT marketplace in concert with Immutable X. That too, looks like it won’t be enough to stop the downward price momentum.
About all I can say is that GameStop is at least heading into this NFT pivot with some semblance of a strategy. It did open new offices in Seattle and Boston which more closely connects the company to established pools of tech talent. At least GameStop now has that going for it. But overall it remains difficult to see what the end game is.
More Questions for GME Stock
I feel like this just leaves investors with more questions than answers. What is the end game? According to a Verge article: “GameStop’s marketplace is pitched as a place to buy and sell in-game assets represented as blockchain tokens — GameStop offers the examples of digital real estate, weapons, and character skins.”
Can GameStop realistically expect to make enough money from that to turn around its fortunes? It’s a pretty big company and it would require a lot of NFT demand in order for that to be the case. It seems like an odd move by a desperate company.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.
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