It Might Just Be Time to Play GameStop
Here’s how I’d handle GameStop after the stock pops.
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Shares of GameStop (GME) popped after the retailer reported preliminary fiscal second-quarter earnings. The company expects to post net income of between $290 million and $310 million when it officially goes to the tape with its results on Sept. 8. This would be up sharply from the year ago comp of $168.6 million. Operating income expected to land at $150 million to $170 million. That would compare to just $66.4 million.
This significant boost to these bottom-line results were driven by roughly $238 million in net gains made from converting an eBay derivative asset into a direct equity investment of 43.4 million shares of eBay (EBAY), that was partially offset by a $75 million loss on digital assets and related receivables. The investment is valued at $4.947 billion.
Sales were not especially good but will beat Wall Street’s expectations. Net revenue is projected to decline to a range spanning from $780 million to $800 million, down from $972.2 million for the year-ago period. That said, consensus was for just $756.85 million as Wall Street was well aware that the firm was up against store closures, the sale of the French business and the release of the Nintendo Switch 2 gaming platform during the fiscal second quarter of 2025.
Obviously, as GameStop converted that derivative position into equity, investors should expect to see a serious decrease in the company’s cash position. Cash, cash equivalents and marketable securities are expected to be in the range of $5.050 billion to $5.070 billion when the balance sheet is published next week, compared to $8.694 billion at the close of the second quarter last year.
Is It Time to Buy GameStop?
Actually, maybe it is.
Take a look at this. GME shares have been mired in a more than yearlong “falling wedge” pattern of bullish reversal.
The shares just recently tested trendline support for a fourth and fifth time since the pattern started developing. This morning, the stock is trying to take back its 21-day exponential moving average. To do so would get the swing crowd behind the shares. Not too far away are the 50-day and 200-day simple moving averages ($20 & $22 respectively). A swing trader inspired bounce, could in theory, force professional managers to engage with this stock.
Looking beyond the averages, Relative Strength is suddenly not that awful. Down below, the daily moving average convergence divergence also just started looking better. The histogram of the 9-day EMA has gone positive and the 12-day EMA has crossed above the 26-day EMA. A limited trade on the long side could be a good idea, technically, should the stock actually take and hold that green line at $18.80. My target? Off of the swing trade? $22. If the stock can take that 200-day line? $28.
At the time of publication, Guilfoyle had no position in any security mentioned.
