Investing

Earnings Previews: GameStop, FuelCell Energy

With the flow of earnings reports slowed to a trickle, we’re going to take a break from posting previews until June quarter results begin to flow again in mid-July.

However, we couldn’t resist the opportunity to comment on two stocks that have posted huge gains in the past year. See you next month.

GameStop

Over the past 12 months, shares of video game retailer GameStop Corp. (NYSE: GME) have soared by more than 5,900%. In 2020, the stock added about 210% to its share price, and since the beginning of 2021, shares are up another 1,500%. GameStop’s story is well known: total short interest in the stock exceeding 100% of shares outstanding; a short squeeze applied by retail investors; and massive options buying by those same retail investors. GameStop reports results after the closing bell Wednesday.

Analysts are still not convinced the rise in GameStop stock is sustainable. Of 12 brokerages rating the stock, seven have rated the shares a Hold, while only four rate the stock a Buy or Strong Buy. It is not hard to see why. The stock has been trading at around $310, nearly four times the consensus price target of $62.25. The trading price has even outrun the high target of $175.00. All this indicates only downside risk, yet the stock continues to trend higher.

The consensus estimates call for loss per share of $0.83, about half the loss per share posted a year ago, on fiscal 2022 first-quarter sales of $1.16 billion, a year-over-year increase of 8.8%. For the full year, GameStop is expected to post a loss per share of $1.02 on sales of $5.45 billion.

GameStop is not expected to post a profit in fiscal 2023 either. In the real world, the company remains a train wreck. The stock was up more than 3% Wednesday morning, at $309.57 in a 52-week range of $3.77 to $483.00. The average daily trading volume is 12.8 million shares.

FuelCell Energy

Hydrogen fuel cell maker FuelCell Energy Inc. (NASDAQ: FCEL) actually posted a larger 2020 share price increase than GameStop. FuelCell shares gained 345% last year, compared to GameStop’s paltry 210%. However, unlike GameStop, the music stopped for FuelCell Energy in mid-February and the stock has managed a gain of just 7% in 2021, compared to GameStop’s 1,500% jump. FuelCell Energy reports quarterly results before Thursday’s session opens.

FuelCell Energy raised about $250 million from two secondary offerings late last year and used about half of it to reduce debt while putting the rest in the bank. Behaving like an adult didn’t do much for the company’s share price though.

Even with the share price now well below the 52-week high, analysts remain cool to the stock. Of 10 brokerages, none has a Buy or Strong Buy rating on the stock, and three have a Sell or Strong Sell rating.  Shares traded at around $12 Wednesday morning, virtually identical with the consensus price target of $11.96. Based on a high target price of $17.20, upside potential on the stock 43%.

Consensus estimates call for a per-share loss of $0.05 on sales of $18.86 million. The per-share loss is two cents lower than a year ago, and the revenue estimate is essentially flat year over year for the company’s fiscal second quarter. The company is pegged to post a fiscal year loss of $0.29 per share on sales of $78.74 million.

FuelCell Energy is not expected to post a profit in either the 2022 or 2023 fiscal year. The stock’s 52-week trading range is $1.58 to $29.44, and the average daily trading volume is about 26.2 million shares.