PreMarket Prep Stock Of The Day: GameStop

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

The day that we all have been waiting for: GameStop Corp's GME earnings report... Since the report is nearly meaningless, the price action in the issue makes it the PreMarket Prep Stock Of The Day.

Chaotic Rally And Reversal: Although the move emanated from much lower prices, GameStop didn't enter silly town trading until Jan. 22. In that session, it rallied from $43.83 to $65.01 and that was just the beginning of the rally.

Four days later, it rallied to $483 while its all-time closing high was posted the day prior at $347.51. Just as violent the rally was, so was the retreat. Three sessions after the all-time high, it cratered to $74.22 and ended the session at $90.

Finding A Bottom: Over the next 12 sessions, it was all over the place. The quick rebound back over $100 was snuffed out and the issue continued to make new lows for the retreat. It finally found a bottom on Feb. 19 ($38.50) and embarked on another wild ride north.

Rebound High In A Familiar Place: After reclaiming the $100 level on Feb. 25, ending the session at $108.73, it retreated the next day to $101.74 and then blasted higher. It traded higher in seven of the next eight trading sessions finally peaking on March 10 at $348.50.

That should sound like a familiar number since its all-time closing high was just below at $347.51.

Street Selling Into Q4 Report: On the same day GameStop made the $348.50 high, it retreated to close at $265. It was able to hang around that level for a few days, but by the end of last week, it was clinging to the $200 level.

It declined in the first two days of the week to $181.75 ahead of the report on Tuesday after the close.

Q4 Report: It’s hard to identify a reason to stay long into the report since it's obvious the company can't complete such a rapid turnaround in such a short period of time. The company reported quarterly earnings of $1.34 per share, which missed the analyst consensus estimate of $1.35, and sales of $2.12 billion were shy of the $2.21 billion estimate. That keeps intact a nine-quarter streak of revenue misses.

More worrisome to shareholders is that the company suspended forward guidance and is considering doing a stock offering that would be dilutive to current shareholders.

Price Action: As expected, the issue is deep in the red in Wednesday’s session. Also, adding further selling pressure to the issue is that the company said very little on its conference call on how it would transforming itself moving forward to validate its current valuation.

After a lower open, GameStop attempted to rally but found sellers well ahead of the bottom of Tuesday’s range ($177.55), only reaching $166.97, and continued its move lower. It has continued to make new lows for the session with the current one being at $141.27 as of 12 p.m. EST.

Based on the daily charts, the next daily low is not until its March 5 low ($127.50). A better area of support, if the decline continues, may be the trio of lows from March 2-4 in the $112.20-155.30 range.

The full discussion on the issue from Wednesday’s show can be found here: