- GameStop stock has dropped by 13% from its highest point this year.
- The company will release its financial results on Tuesday this week.
- Technical analysis suggests that the stock will continue falling, potentially to $20.
GameStop stock price has pulled back this month, moving to its lowest level since January 23rd. GME was trading at $22.50, down 13% from its highest point this year and 37% below its 2025 high. So, will the shares jump or fall after its earnings on Tuesday?
GameStop Stock at Risk Ahead of Earnings
GME stock may drop this week as its business continues to face major headwinds. A key challenge is that the gaming console industry is facing a memory chip shortage, which has pushed companies like Sony and Nintendo to postpone their consoles this year. Console prices have all soared, which may impact its revenue growth.
These challenges are on top of the ongoing shift to buying consoles and games online, which has pushed revenue growth downward in the past few years. Its annual revenue dropped from over $5 billion in 2021 to $3.8 billion in 2024.
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GameStop’s business is also struggling as its Bitcoin holdings have backfired. The company spent over $500 million buying 4,710 coins, which are now worth about $321 million.
The most recent results showed that GameStop’s revenue dropped from $860.3 million in the third quarter of 2024 to $821 million in the third quarter of last year. As a result, the company recently announced plans to close hundreds of stores to focus on its profitable locations.
The upcoming results are expected to show that its business continued to slow in the fourth quarter, with revenue expected to come in at $1.1 billion, down from $1.2 billion in the fourth quarter of 2024.
On the positive side, GameStop still has one of the best balance sheets in the retail industry. It has over $7.8 billion in cash, $986 million in marketable securities, and Bitcoin assets worth over $321 million. It has about $4.16 billion in long-term debt.
These results come two months after the company unveiled a highly ambitious reward scheme for Ryan Cohen, the company’s CEO. Cohen will receive 171.53 million shares at $20.66 if it hits key milestones. The reward will be paid in full if the company achieves a market capitalization of $100 billion and EBITDA of $10 billion.
GME Stock Price Technical Analysis
The daily chart shows that the GameStop stock price has slumped over the past few weeks, moving from a high of $25.90 in February to its current price of $22.5. It has dropped to its lowest level since January this year.
The stock has moved below the 23.6% Fibonacci Retracement level and the key support level at $24.10, its highest point in December last year. It remains below all moving averages, a sign that bears remain in control.
The stock has also formed a diamond reversal pattern, pointing to a strong bearish breakdown in the coming days, potentially after the earnings. If this happens, the next key target to watch will be at $20, its lowest level in November last year.
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