As Bed Bath & Beyond folds, how safe is GameStop (GME) stock?

By:
on Apr 24, 2023
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  • Bed Bath & Beyond filed for Chapter 11 bankruptcy on Sunday.
  • There are concerns about other struggling meme stocks.
  • GameStop is safe for now, thanks to its strong balance sheet.

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Bed Bath & Beyond (NASDAQ: BBBY) finally decided to file for bankruptcy protection on Sunday after the company’s funds ended. This move was expected considering that the BBBY stock price was down by over 91% in the past three months. 

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It became a penny stock that ended Friday at $0.2935, down from its all-time high of $85. So, some investors have questions about whether other meme stocks like ContextLogic (NYSE: WISH) and GameStop (NYSE: GME) will be next.

GameStop is not going bankrupt soon

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Bed Bath & Beyond filed for bankruptcy protection because the company run out of cash. It has struggled to raise enough cash in the past few months. In a recent statement, the firm said that it needed about $375 million to get to the holidays. 

The most recent results showed that it had $153 million in cash and short-term investments against long-term debt of over $1 billion. Its short-term debt was about $907 million. Therefore, with its sales dwindling and losses rising, the company had no chance of survival without capital infusion.

Therefore, there are concerns about popular meme stocks like retailers GameStop and Wish.com. However, while the long-term viability of GameStop is uncertain, the reality is that the company is not going bankrupt soon. 

Unlike Bed Bath & Beyond, GameStop has one of the best balance sheets in the industry. The firm has over $1.39 billion in cash and short-term investments and little debt. It has no short-term borrowings and just $28.7 million in long-term debt. The company said the following in its most recent earnings call:

“At the end of the year, we had no borrowings under our ABL facility and no debt other than a low-interest unsecured term loan associated with the French government’s response to COVID-19.”

GameStop turned a profit

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The other difference between GameStop and Bed, Bath & Beyond is that the company turned a profit in the fourth quarter. Its profit came in at $48 million, a major improvement after the company lost $147 million in the same quarter in 2022.

GameStop is also working to cut its costs by closing unprofitable locations and even exiting some markets like those in Europe. The company pledged to aggressively cut costs this year, which could lead to some short-term losses.

Still, while GME is not going bankrupt soon, it does not make it a good investment. For one, analysts expect that the company’s annual revenue and profits will continue struggling. Expectations are that its revenue will drop to $5.91 billion this year and $5.63 billion in 2024. 

Also, the reality is that GameStop operates in an industry that is in a long-term decline as more people opt to game streaming and online console purchases.

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