Wednesday's Market Minute: GameStop Or Go

One of the original “meme” stock names, GameStop GME is set to release earnings after the bell today. According to Zacks, GameStop’s earnings per share last quarter were $1.34, and are currently estimated to be $0.63; revenue was $1.18 billion last quarter and is expected to be $1.13 billion. Traders should consider that GME has averaged a decline of 14.2% the day following its earnings release for the past 10 years. With a “Reddit” stock like GME, investors should expect high implied volatility and high option premiums. Due to the mania surrounding this company, its earnings release may cause a big move upward or a significant move down.

Consider that GameStop was taken off the Fortune 500 list after 14 years, a key signal that the company could be struggling internally. In 2020, GameStop closed over 693 stores and expects future closures this year, even though GME shares are up over 1200% year to date. As the retail space begins to reopen post COVID-19, GME could, however, be positively impacted as a potential reopening trade. Additionally, GameStop plans to start shifting its business model to become more digital and has already appointed a Chief Technology Officer. It will be interesting to see how the fundamental data release will impact traders driven by social media popularity. With all of this in mind, investors should be cautious towards GME as earnings are released.

Image Sourced from Pixabay