GameStop Earnings Preview—Everyone's Favorite Meme Stock

A 10% stock price range is expected, with earnings-per-share of $0.08 on $1.48 billion in revenue

• GameStop will report quarterly earnings after the market closes on Tues., March 25.
• Implied volatility shows a 10% stock price range for the announcement.
• The company is expected to report earnings-per-share (EPS) of $0.08 on $1.48 billion in revenue
• It has had questionable earnings history, missing EPS or revenue a handful of times over the past year

GameStop (GME) is reporting earnings this week, and implied volatility is still high for the gaming retailer. It is expected to announce earnings-per-share (EPS) of $0.08 on $1.48 billion in revenue for the quarter. GameStop has had a hard time posting consistent earnings reports that exceed estimates, so the market is pricing in a lot of uncertainty around the announcement with a 10% stock price range for the week based on current implied volatility.

In typical meme stock fashion, GME stock had a wild bull run in the summer of 2024 ripping to over $60 per share. After crashing down, the stock hasn't really left the $20-35 range. The stock currently sits around $25 per share. Questions loom around the future of the company with so many competitors ditching store-fronts and going completely digital. With that said, there have been rumors around GameStop stepping into the crypto space, so more information on that could be interesting for the realized stock price movement after earnings.

During the last earnings report, executives did not hold a conference call for commentary, but some quarterly data are listed below from their quarterly filing:

• Net sales were $0.860 billion for the period, compared to $1.078 billion in the prior year's third quarter.
• Selling, general and administrative (“SG&A”) expenses were $282.0 million for the period, compared to $296.5 million in the prior year's third quarter.
• Net income was $17.4 million for the period, compared to a net loss of $3.1 million for the prior year’s third quarter.
• Cash, cash equivalents and marketable securities were $4.616 billion at the close of the quarter.
• During the quarter, the Company completed its previously disclosed "at-the-market" equity offering program pursuant to the prospectus supplement filed with the SEC on September 6, 2024 by selling 20.0 million shares of its common stock for aggregate gross proceeds of approximately $400.0 million (before commissions and offering expenses). The Company does not anticipate any further at-the-market offerings involving the offer and sale of its common stock during the current fiscal year.

GameStop executives are sitting on a lot of cash, and CEO Ryan Cohen has been rumored to consider cryptocurrency investments. We will have to wait and see if there is any commentary on the topic this Tuesday, after the earnings report is released.

As stated earlier, there is still plenty of uncertainty around this earnings call based on current implied volatility in GME stock.

There is a +-$2.57 stock price expected move based on current implied volatility, which is almost exactly 10% of the notional value of the stock price that hovers around $25 per share. With most companies landing between 5-10% of the stock price for earnings, this puts GameStop on the higher end of expected moves for earnings announcements this quarter.

Looking further, we can see a +-$5.10 expected stock price move through the May 2025 cycle. Even though we have high implied volatility for this week, we still have sustained high implied volatility based on the fact that this earnings call makes up under 50% of the expected move through May. Sometimes we see a much higher differential, which indicates that a lot more weight is being put on the earnings announcement. GameStop has perpetually high implied volatility though, so this lack of weight on this earnings call makes sense.

Bullish on GME Stock for Earnings

If you're bullish on GME stock for earnings, you want to see an EPS and revenue beat this quarter, with executives offering commentary on the future strategy. Earnings have been quiet, and traders want to hear more about a solid plan for the company if we're expected to see the stock price rally in a big way this week.

Bearish on GME Stock for Earnings

If you're bearish on GME stock for earnings, you're looking for an EPS and revenue miss, with more uncertainty around the future of the company. The lack of commentary around earnings is certainly not a good look from the public eye, as investors and traders look elsewhere to find the returns they're looking for.

Tune in to Options Trading Concepts Live on Tuesday, March 25th, at 11am CST for an in-depth look at earnings strategies for GameStop's earnings call after the close.

Mike Butler, tastylive director of market intelligence, has been in the markets and trading for a decade. He appears on Options Trading Concepts Live, airing Monday-Friday. @tradermikeyb  

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