Why GameStop (GME) Shares Are Falling Today

What Happened:

Shares of video game retailer GameStop (NYSE:GME) fell 14.8% in the morning session after the company reported second-quarter earnings results. Its revenue unfortunately declined and missed by a wide margin, consistent with the broader weakness we've observed in the Consumer sector during the quarter. In addition, the company reiterated the focus on closing underperforming stores to improve efficiency. This suggests the topline might continue to be pressured as the company shrinks its footprint. Overall, we think this was a challenging quarter for the business.

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What is the market telling us:

GameStop’s shares are very volatile and over the last year have had 57 moves greater than 5%. But moves this big are very rare even for GameStop and that is indicating to us that this news had a significant impact on the market’s perception of the business.

The biggest move we wrote about over the last year was 4 months ago, when the company gained 119% as stocks soared (AMC Entertainment (NYSE:AMC) +14%, Newegg Commerce (NASDAQ:NEGG) +14%, Beyond (NYSE:BYON) +14%). Gamestop's stock rally also coincided with the return of the famous Wall Street Bets (Reddit stock trading forum) trader Keith Gill (known online as Roaring Kitty) to Twitter (also known as X.com) after three years. The moves highlighted the growing interest of retail investors in the stock market.

GameStop is up 18.5% since the beginning of the year, but at $19.79 per share it is still trading 59.4% below its 52-week high of $48.75 from May 2024. Investors who bought $1,000 worth of GameStop’s shares 5 years ago would now be looking at an investment worth $17,242.

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