Should You Buy, Sell or Hold Motorsports Games on the Earnings Dip?

Stocks to sell

Esports ecosystem provider Motorsports Games (NASDAQ:MSGM) was punished by the market after releasing disappointing fourth-quarter and full-year earnings results. The losses were so bad in fact that MSGM stock dropped nearly 36% on the day they were released. Although esports is an industry with projected compound annual growth rates of 17.5%, and MSGM stock is making a slight recovery today, it’s still a stock to avoid on this dip.

A large part of why investors should stay away from MSGM stock today is that it is headed in the wrong direction on multiple fronts. It is generally difficult to recommend buying shares in companies with increasing losses. That holds true here as Motorsports Games’ net loss more than doubled in Q4 on a year-over-year basis. The company nearly lost $7 million in Q4 2021, up from a loss just over $3 million the year prior. 

The news was significantly worse for the entire year. Motorsports Games recorded a net loss of roughly $680,000 in all of 2020, but a loss of $33.7 million in 2021. The problem in the report wasn’t simply that the company lost lots of money, but that it also failed to meet expectations.

Wall Street was anticipating that the firm would report $13.8 million in revenues, but the company fell short, posting $8.2 million in Q4. 

Avoid the Dip in MSGM Stock

MSGM stock has largely disappointed since going public in January of last year. Share prices have steadily trended downward after beginning trading at $30. 

While analysts are neutral (all four analysts with current coverage give the stock a hold rating), I still suggest that investors stay away. Motorsports Games posted a 60 cent per share loss this quarter. That figure is anticipated to be a $1.11 per-share loss through the entirety of 2022 according to Yahoo! Finance. None of this inspires confidence in MSGM stock moving forward.

On the date of publication, Alex Sirois did not have (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.

Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks.Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.

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