GameStop Q1 Earnings in Focus as Stock Recovers From Recent Lows
GameStop Q1 Earnings in Focus as Stock Recovers From Recent Lows
What do investors expect with Cash Stockpile, Nintendo Switch 2 and Bitcoin?
- GameStop is scheduled to report first-quarter earnings after the market close tomorrow.
- Analysts expect earnings per share of $0.08 on $750 million in revenue.
- The options market sees GameStop moving +/- 11% after earnings.
GameStop (GME) is set to report first-quarter fiscal earnings tomorrow. The company’s stock is up over 40% since late March when it reported mixed results for the fourth quarter. Comparatively, the S&P 500 is up about 10% over the same period.
One tailwind for GameStop could come from the recent release of the Nintendo Switch 2. The new gaming console went on sale earlier this month and has so far seen strong sales. In fact, GameStop sold out the day the new system went on sale last Thursday. Although this is after the reporting period, the upbeat demand for the Switch 2 could instill some confidence in GameStop’s outlook.
Another positive can come from the rise in bitcoin prices. On May 28, GameStop announced it purchased 4,710 Bitcoin but failed to provide specific dates for the purchases. GameStop’s board voted to approve bitcoin as a treasury reserve asset back in March.
Bitcoin prices (/BTCM5) traded 4% higher today. Since the April swing low, Bitcoin is up over 40%. While the recent appreciation in price for Bitcoin likely won’t be captured in its earnings per share for the reporting period, an additional increase in prices of the crypto asset could provide another tailwind for the stock price.
What do analysts anticipate?
Analysts expect earnings per share (EPS) to come in at $0.08 for the first quarter and revenue to be $750 million, according to TradingView. That would compare to EPS of -$0.12 and revenue of $881.80 million a year ago. Last quarter, GameStop’s EPS was $0.30, and revenue was $1.28 billion.
GameStop has beaten EPS estimates but missed on revenue in three of the last four quarters. The company has a substantial cash position of about $4.8 billion as of last quarter. While some view the cash assets as a positive that can be strategically deployed, others see it as a sign the company lacks focus in using its capital.
Trading GameStop earnings
GameStop traded with an implied volatility rank (IVR) of 34.2 as of today. That means volatility is below average compared to the past twelve months of trading. The options market shows an expected move of +/- 3.38 points, or 11% of Monday’s 30.33 stock price. That is above the average 5% to 10% range for S&P 500 earnings.
Technically, GameStop is trading above its nine-day exponential moving average (EMA), and the 21-day EMA has supported prices since early May. The 50-day simple moving average (SMA) crossed above the 200-day SMA in May, providing a bullish technical signal known as a Golden Cross.
A negative earnings report could push prices down below the EMAs, but there is a level of previous resistance that might turn into support around the 28 handle. If prices break below there, the upsloping 50-day SMA could come into focus for bears. Alternatively, a positive report could see prices rise to challenge the recent swing high from May at 35.81.
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Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. #@fxwestwater
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