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GameStop (NYSE:GME) stock is up about 8% after reporting Q1 2022 earnings yesterday. The company beat Wall Street expectations for net sales. However, some experts remain skeptical of GME’s growth potential as it pivots to digital assets amid sharp crypto price declines.
After the report, shares climbed as high as 9% in extended trading. However, the company saw mixed numbers for the period.
In Q1, net sales reached $1.38 billion, an 8% year-over-year (YOY) increase. That was well above the expected $1.33 billion. That said, the company’s net loss “more than doubled to $157.9 million” as well.
Let’s take a look at what else is affecting the future of GameStop.
What’s Happening with GME Stock?
Earnings aren’t the only thing affecting GME stock. Today, shareholders will also vote on a proposal to increase GameStop’s share count. Management is likely gearing up for a potential GME stock split. More importantly, though, the company is in the middle of a business transition. GameStop is pivoting to crypto and NFTs.
This foray into digital assets initially excited investors. As Ars Technica reports, physical gaming equipment has become a “niche market.” Needing a way to stay relevant, the company is following growing interest in the asset class. In March 2022, it announced that it would launch an NFT marketplace by Q2.
This announcement helped push GME stock up in April. However, share soon fell again — and did not rebound even as the company launched its crypto wallet.
GameStop’s wallet launch came just as cryptos began plunging due to a Federal Reserve rate hike and other macro factors. This sent Bitcoin (BTC-USD) under $40,000. Smaller cryptos dropped in sympathy. Overall, crypto markets and NFT prices have fallen subject to bearish energy lately.
Trading in the green today, GME stock is seeing some much needed relief.
The Bottom Line on GameStop
GameStop is trying to become more than a game disc retailer. It’s right to try to adapt. As the earnings report shows, though, timing has not been on the company’s side. Still, the recent crypto crash is not GameStop’s fault — and not necessarily a reflection of its growth potential.
Crypto markets will likely bounce back. And when they do, it will mean a more profitable season for GME. The company is attempting to become a dynamic one-stop shop for retail investors’ digital asset needs.
GameStop is grappling with the current crash, but that doesn’t mean Wall Street should overlook its turnaround.
On the date of publication, Samuel O’Brient did not hold (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.