Tomorrow is a big day for GameStop (NYSE:GME) as the beleaguered video game and electronics retailer releases its latest earnings report. What should investors look for? What do these results mean for the video game sector and the broader economy? Let’s have a look at GameStop ahead of its earnings, as investors clearly anticipate big news. How can we tell? Because GameStop shares are up nearly 13% in Monday afternoon’s trading.
It seems as though investors have already decided to expect good news from GameStop, but not everyone is so certain. Reports suggest that GameStop is staring at “potential downside risk amid a bearish technical pattern,” which is not a good sign. After all, its core business of selling used video games and their consoles is running out of steam as more publishers move to an exclusively digital model.
With the supply dwindling, GameStop may be able to protect itself by branching out—which, if you remember their non-fungible token (NFT) marketplace, hasn’t gone well in the past—and looking to its margins and expenses. But with valuation still perhaps skewed from the meme stock rush of the pandemic era, some wonder just what kind of results GameStop can pull out.
Signs of Life for the Battered Stock
While things aren’t looking great for GameStop’s primary line of business, and most of its attempts to branch out haven’t exactly gone all that well either, there are some signs of life for the battered stock. Reports suggest that the fourth-quarter holiday sales might have given GameStop the goose it needed to turn in a win, at least this time around. In fact, analysts expect GME’s earnings to come in at $0.29 per share.
Plus, we have to consider that GameStop, back in mid-December, authorized CEO Ryan Cohen to buy shares of other companies using GameStop’s money. At the time, that prompted plenty of eye-rolling and pronouncements that GameStop was now a hedge fund that occasionally sold used video games, but the plan may have worked in its favor. Only the earnings release itself will tell.
Is GameStop a Buy, Sell, or Hold?
A look at the last five trading days for GameStop shows that the stock is on the rise overall. It gained in the early part of this period but reversed those gains in the second half. The imminent arrival of earnings, however, sent shares spiking today. The spike was blunted a bit in a reversal, but a subsequent rally sent shares back above to a new five-day high.
