GameStop shares have experienced a remarkable surge in recent weeks, which might give the impression that the US retail chain is on the path to recovery. However, a closer look at the fundamental company figures paints a less rosy picture.

In mid-May, the financial influencer Keith Gill, better known as "Roaring Kitty," returned to his social media channels after three years. His comeback, which significantly fueled the 2021 meme stock rally, once again triggered a sharp rise in GameStop shares. Within a month, the retailer's stock surged by more than 40 percent.

On Sunday, Gill posted a screenshot on Reddit showing his current investments in GameStop: he owns five million shares worth $115.7 million and 120,000 call options worth $65.7 million. This suggests that Gill still sees potential in GameStop stock.

Despite the renewed hype, the fundamental outlook for GameStop is anything but promising. The company's revenue has been declining for years. In 2023, revenue amounted to 5.273 billion USD, a significant decrease from over ten billion USD a decade ago. For the current fiscal year, analysts expect a further decline to 4.7 billion USD.

Earnings warning for the first quarter of 2024 underscores this grim forecast. Net revenue is expected to be between $872 million and $892 million, well below the previous year's figure of $1.237 billion and analysts' expectations of $1.045 billion.

GameStop struggles not only with declining sales but also with high costs. The retail chain operates over 4,000 stores worldwide, which are associated with high rental payments. Many of these stores are located in prominent locations that require high rents but attract few customers.

In the fiscal year 2023, GameStop generated a net profit of only 6.7 million USD despite revenue exceeding 5 billion USD. The company's debt amounts to 600 million USD.

To stabilize the financial situation, GameStop recently conducted a capital increase, issuing 45 million new shares and raising approximately $933.4 million. The company plans to use these funds for general corporate purposes as well as potential acquisitions and investments.

The current valuation of GameStop stock appears inflated from a fundamental perspective. The share price recently stood at $26.50, corresponding to a market capitalization of $8.57 billion – a multiple of the net profit of $6.7 million in 2023.

Nevertheless, the story of the 2021 meme rally demonstrates that stocks can achieve significant price gains even with weak fundamentals, when enough investors become active on platforms like Reddit. However, whether GameStop will ever reach its record valuation of 2021 again, when the company was temporarily worth 210 billion US dollars, remains uncertain.

While GameStop's stocks benefit in the short term from the comeback of "Roaring Kitty," the long-term outlook remains uncertain due to weak corporate figures and challenges in retail. Investors should be aware that the current hype cannot solve the company's fundamental problems.