GameStop fell about 0.4 percent today, its fifth down day in the last ten, and now sits about 15 percent below its July high. We think this is mostly the tail end of a slide triggered by the company swapping $1.4 billion of debt for new stock.
Our view
A drop like this is no fun to sit through, but the company's massive cash pile remains the real anchor here. If you already own it, the move is to stay the course and watch how that capital is eventually spent.
Swapping 1.4 billion dollars of debt for new stock
The company reached a deal to trade about 1.4 billion dollars of its debt for new shares of stock. This move effectively wipes out that debt without the company having to spend any of its 6.4 billion dollar cash balance.
For a long-term owner, this is a trade-off. It keeps the company's massive bank account intact for future acquisitions, but it also creates more total shares. When more shares exist, each individual share owns a smaller piece of the business, a process called dilution. The stock fell on the news as the market weighed the benefit of a cleaner balance sheet against the cost of having more shares in circulation.
The company revealed it now owns nearly 10 percent of eBay. This follows an earlier, uninvited offer to buy the entire e-commerce site for about 56 billion dollars.
This is a major pivot from selling video games in malls to becoming a broad investment firm. By buying a large stake, the company is signaling it is serious about a takeover despite eBay's initial rejection. If a deal actually happens, it would fundamentally change what this company is, moving it away from its shrinking retail stores and into a much larger digital marketplace business.
The company is now listed on Uber Eats, allowing people to order consoles, games, and collectibles for immediate delivery from local stores. While this helps the retail stores stay relevant in a world of digital downloads, it is a small move compared to the company's much larger plans for its cash and potential acquisitions.
About 69 percent of voting shareholders approved a plan to increase the number of authorized shares the company can create. This gives management the ability to use new stock as a currency to buy other businesses.
This is a key step in the plan to transform the company. Without the ability to issue more stock, the company would be limited to using only its current cash. Now, it has more flexibility to pursue large targets like eBay, even if it means diluting existing shareholders in the process.
Analysts have consistently maintained a cautious stance on GameStop for years, with recent activity focused on downward price target adjustments. Only 6 of 36 analysts recommend buying, and the average target of $18 is slightly below the current price.
Average target$18.25-5%vs $19.16 today
Avg price
Low $11.50High $25
Hold36 analysts
10Bearish
20Neutral
6Bullish
FirmRatingPrice TargetDate
Wedbush
Underperform
$10→$11.50
3/26/2025
Wedbush
Underperform
$11
9/9/2024
Wedbush
Underperform
$5.60
3/27/2024
Wedbush
Underperform
$6
3/25/2024
Wedbush
Underperform
$15.77
12/7/2023
Wedbush
Underperform
$45
3/17/2022
Jefferies
Hold
$100
1/22/2022
Jefferies
Hold
$145
1/12/2022
GameStop earnings
The company has a perfect record of beating analyst estimates over the last two years. This suggests management is very good at setting a bar they know they can clear.
Earnings history
EstimateBeatMiss
GameStop past earnings results
Expected
Actual
Surprise
EPS
$0.16
$0.30
+87.5%
Revenue
$767M
$835M
+9.0%
Key highlights
Net income record: The company earned $389.6 million in net income, which is the highest quarterly profit in its history and a large jump from the $44.8 million it earned a year ago. These results were boosted by a $268.4 million gain on investments related to eBay stock.
Collectibles driving growth: Collectibles revenue grew 65% to $348.9 million, making it the largest part of the business at nearly 42% of total sales. This growth helped total sales rise 14% to $835.3 million even as sales of game software fell to $152.7 million.
Operating costs falling: Management reduced overhead expenses, which are the costs of running the corporate office and stores, by $26.5 million compared to last year. These expenses fell to $201.6 million, helping the company reach $143.3 million in operating income.
Cash pile growing: Total cash and investments reached $9.7 billion at the end of the quarter, up from $6.4 billion a year ago. To help return some of this value to owners, the board approved a new plan to spend up to $2.0 billion buying back its own shares through June 2029.
Future spending plans: While the company did not give specific revenue targets for next year, it disclosed a massive $2.0 billion share repurchase authorization. This gives management the power to buy back stock over the next three years using a portion of its $8.4 billion in cash and marketable securities.
Our take: A very strong quarter that shows the company is successfully shifting its focus away from dying physical game discs. The record $389.6 million profit and the huge jump in collectible sales prove the business can be profitable while it waits to spend its $9.7 billion cash pile. It strengthens the case for the company's survival.
GameStop’s next earnings date
Q2 2026
SEP
8
Expectation
EPS
$0.27
Revenue
$757M
Metrics we are tracking
Metric
Expectations
Status
Cash Balance
Staying above $6.0 billion while awaiting deployment
