GameStop Earnings Preview: GME stock gives up another 2% ahead of post-market results

Update: GME stock is still falling. The stock is down more than 3% at $120.35 on Wednesday morning after giving up 9.1% on Tuesday. The Nasdaq is down for a second straight session as well, which tends to hurt the riskier stocks like GME. GameStop stans abound, but unlike normies they tend to be less bullish around earnings. Instead, they typically look for short squeeze opportunities in between earnings calls. This is most likely a result of GameStop not having a great history of earnings beats. 1,124 call contracts at the $130 strike that expire this Friday have exchanged hands this morning. The price has fallen more than 20% from yesterday, but they were last seen trading at $6.60 a share. Rather expensive, no?

GameStop (GME) stock has dropped 9% to $124.85 in the first hour of Tuesday's session. The Nasdaq is off about 0.6% at the time of writing. This is a bad sign ahead of GameStop earnings slated to come out after the market closes on Wednesday. Despite GameStop's strong retail following, shareholders do not seem to have diamond hands at the moment.

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GameStop Stock Earnings: A poor earnings history

Wall Street expects GameStop to release a Q1 adjusted earnings loss of $-1.22 per share on overall revenue of $1.32 billion. A salient point is that over the past eight quarters GameStop has missed five EPS estimates and four revenue estimates. If there is any solace in that, it is that the videogame retailer has beaten revenue estimates for four quarters in a row.

With its most recent quarter clocking in at $2.25 billion, revenue seems like a fairly easy metric to beat consensus, although the last quarter did overlap with Christmas sales, which usually bring in a much higher level of seasonal turnover. In the first fiscal quarter one year ago, the company reported an adjusted loss of $-0.45 per share on revenue of $1.28 billion.

Wedbush analyst Michael Pachter says adding PC games and accessories could add future revenues of $300 million in annual sales in a few years to GameStop's top line, but he did not see this new strategy becoming a major share price driver.

GameStop's new crypto wallet, called the GameStop Wallet, was released last week. The wallet allows gamers to utilize the wallet in their browser while they are playing games that involve crypto and NFT-based prizes.

GameStop Stock Forecast: Earnings clouding out chart analysis

As we correctly forecast last week, GME stock did make a run at $130. In fact shares traded as high as $148.46 on May 26. The following two sessions are offering falling price action however. This is typically a sign that shares are headed lower over the short-term. With a poor earnings call, GME stock could easily drop all the way to support between $90 and $88. This is the same area it launched from last week.

The good news is that the 9-day moving average was able to cross above the 20-day moving average and the Moving Average Convergence Divergence (MACD) is still headed upward toward the zero level. Both point to bullish movement ahead, but last week's insane rally seems to have taken most of the energy out of this name. Best to wait until earnings are past and then reassess.

GME daily chart

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