With weak fundamentals and skepticism around its strategy, GameStop could see over 40% downside, warns Wedbush analyst.
Q2 Earnings Loom with High Expectations
GameStop (GME) is scheduled to report its second-quarter 2025 earnings on September 9, and investors are bracing for volatility. While Wall Street expects earnings of $0.19 per share—a sharp rise from $0.01 a year ago—underlying concerns remain.
- Revenue is projected to grow 13% year-over-year to $900 million, despite the broader challenges in the gaming retail space.
- The market will closely watch whether GameStop can sustain profitability and deliver a clearer strategic direction moving forward.
Previous Quarter: Profit Surprise, Sales Disappointment
GameStop surprised many in Q1 by posting a net profit of $44.8 million or $0.17 per share, well above the $0.04 estimate.
- However, revenue was a weak point, falling 17% year-over-year to $732.4 million, missing forecasts of $754.2 million.
- The company’s core hardware and software sales continued to decline, with Main Street Data pointing to persistent weakness in the Hardware and Accessories segment.
One of the few positives was the Collectibles segment, which grew 54% to $211.5 million, highlighting potential for diversification.
Investor Worries: Bitcoin, Strategy, and Cash
Despite the temporary profitability, GameStop’s long-term outlook remains cloudy. The stock is down 27% year-to-date, weighed by:
- Retail sales declines across key product categories.
- Investor concerns about its pivot into Bitcoin and blockchain, which lacks transparency and traction.
- Doubts about how the company will deploy its $6.4 billion cash pile, with no solid reinvestment plan in sight.
The lack of a clear roadmap has led analysts and investors alike to question the company’s direction.
Analyst Alicia Reese Sees Steep Downside
Wedbush analyst Alicia Reese is among the few still covering the meme stock and maintains a firm Sell rating.
- Her price target of $13.50 per share represents over 40% downside from current levels.
- Reese cites fundamental weakness, lack of transparency, and uncertain execution as reasons for her bearish stance.
With so much of GME’s recent movement tied to speculative retail trading, the risk remains elevated as earnings near.
Is GME a Buy, Sell, or Hold?
The market remains sharply divided on GameStop’s future:
- Bulls see potential in its meme stock momentum and cash reserves.
- Bears argue that declining fundamentals, a volatile strategy, and limited analyst coverage are red flags.
For now, most institutional investors appear to be on the sidelines, watching to see whether Q2 offers proof of a turnaround—or more reasons to sell.