Outside a GameStop store people line up to buy a Sony PS5 gaming console in New York City, New York, USA 11 November 2020. Carlo Allegri File Photo
On Wednesday, GameStop is expected to announce its quarterly results after the bell and with a cult following of individual investors looking for progress in turning around the struggling video game retailer following its recent share price surge.
GameStop's volatile shares have risen over 80% in the last month, and they are now just 15% below their January high of 17K. That was when a massive rally followed by investors on the Wallstreetbets trading forum from Reddit and made the stock the most traded on the US market for several days.
Recent surge in AMC Entertainment Holdings has attracted increasing amounts of attention from individual investors and commenters on Wallstreetbets, but GameStop remains one of the most debated stocks on the forum.
The gaming company was up more than 2,400% year to date compared to a rise of over 1,400% in AMC, which also holds quarterly shareholders meetings on Wednesday before its closed-door annual report lasts.
According to Trade Alert data, the Options prices suggest GameStop's stock could rise by Friday 24% in either direction.
While the recent promotion of new video game consoles is likely to benefit GameStop, analysts warn that its soaring stock price has become disconnected from the company's daily day operation. At least two Wall Street analysts dropped the coverage of the company recently.
GameStop's core business of selling new and pre-owned videogame disks is not improving as consumers move to downloading games offline or streaming, and it has lost money for the past three years. Chewy, the billionaire co-founder of online pet supplies retailer Ryan Cohen, hopes to transition GameStop into an ecommerce business that can take on big-box retailers.
The actual views of retail investors and the GameStop-inspired transformation strategy continue to outshadow the bullish results,Wedbush analyst Michael Pachter warned in a preview note.
According to S 3 Partners, a financial data firm, GameStop short sellers currently have 3.3 billion investment at stake, up from $1.3 billion at the end of 2020.
The company has yet to announce a replacement for Chief Executive George Sherman, who is expected to step down by 31 July.
Analysts on average expect $1.16 billion for the quarter ending in April, up 14% from the year before when the coronavirus economic shutdown crippled sales of brick and mortar stores. Analysts expect an adjusted quarterly loss of 84 cents per share to be settled.
The company said that its global sales rose on April 5, 2009, in the first nine weeks of its fiscal year 11%.