GameStop Q3 sales fell year-on-year, but earnings exceeded expectations, causing stock price to surge after hours

According to the Zhitong Finance APP, American video game retailer GameStop (GME.US) has released its latest third-quarter financial report, which shows a year-on-year decline in sales and falls short of Wall Street expectations. However, the company's adjusted earnings per share exceeded market expectations.Earnings per Share: GameStop's adjusted earnings per share for the third quarter were $0.06, higher than the FactSet analysts' expected loss of $0.03. Sales: Net sales were $860.3 million, below analysts' expectations of $888 million. Compared to $1.08 billion in the same period last year, this represents a 20% decline. Despite the sales falling short of expectations, GameStop's stock price rose over 10% in after-hours trading due to the earnings exceeding market expectations.GameStop's stock price has risen 59% year-to-date, making it one of the best-performing years since its stock price skyrocketed by 688% in 2021. In contrast, the S&P 500 index has risen 27% this year. However, this strong performance is not driven by outstanding financial results. On September 11 of this year, the company's stock price fell 12% due to disappointing revenue performance in the second quarter.The rise in stock price this year is partly attributed to "MEME stock" celebrity Keith Gill (online alias "Roaring Kitty") returning to social media in mid-May. His return sparked investor expectations for a similar trading frenzy as in 2021. At that time, retail investors collectively bought GameStop stock through online forums, forcing short sellers to cover their positions and driving the stock price up. After Gill's return, the company's stock price rose 74% and 60% on May 13 and 14, respectively.Nevertheless, the current stock price is down about 43% from the 52-week highest closing price of $48.75 set on May 14.Analysts are cautious about GameStop's future development. Wedbush analyst Michael Pachter gave a "sell" rating in a research report on December 6, setting a target price of $10. He pointed out that the company faces "insurmountable growth obstacles," including a continued preference for digital games among users and a lack of competitive advantage in the company's strategy to enter the trading card market.GameStop announced in October that it had become an authorized dealer for Professional Sports Authenticator, providing authentication and grading services for trading cards. However, it remains to be seen whether this attempt will significantly boost revenue.Additionally, inflation and high interest rates may affect the demand for video game consoles and other GameStop products, posing potential risks to the company's business.Despite the unexpected earnings highlight in GameStop's third-quarter financial report, the decline in sales and challenges in its business model remain concerning. The market expects that the company's stock price may experience significant volatility following the earnings report. According to historical data, companies in the S&P MidCap 400 index (excluding GameStop) have averaged a price fluctuation of 5.5% after the past five earnings reporting periods