- GameStop just went from gaming consoles to crypto coins.
- But can Bitcoin buzz really save a brick-and-mortar brand.
- Or is this just another meme-fueled moment before reality sets in?
- Looking for more actionable trade ideas to navigate the current market volatility? Subscribe here to unlock access to ProPicks AI winners.
In a generally bearish market, GameStop Corp (NYSE:GME) shares stood out on Wednesday, ending the session up 11.65%. During the session, GME peaked at $29.80, a level not seen since January 14.
However, the stock dropped more than 7% in after-hours trading on Wednesday, and plunged as much as 12% at the start of today’s U.S. trading session.
It should be noted that the early gains accentuated a rebound movement that began following the March 13 low at $21.56.
Remember that Wednesday’s rally was a direct response to the company’s announcement that it would be investing in Bitcoin, at a time when its core business of physical video game stores is struggling to attract customers.
As for the decline, this was partly due to profit-taking, but also to the announcement of a $1.3 billion 5-year convertible bond offering to finance the purchase of bitcoins.
In other words, GameStop is about to go the way of Strategy (ex-MicroStrategy), officially a software company headed by Michael Saylor, but one that focuses primarily on the purchase of BTC.
Recall that there has been chatter on social networks about the company’s interest in Bitcoin in recent weeks after GameStop CEO Ryan Cohen shared a photo with Strategy President Michael Saylor on social media platform X last month.
Can GameStop’s New Strategy Justify a Sustained Stock Rally?
The question now is whether GameStop’s new strategic direction can justify a sustained rise in the stock.
On the positive side, it’s clear that the purchase of Bitcoin could increase the share’s appeal to speculators. This is all the more true as GameStop, as a pioneer in meme stocks, is already a popular name among speculators. On the other hand, this should also increase its already high volatility.
However, if we compare GameStop to Strategy, we may well question the long-term wisdom of buying Bitcoin for GameStop. Indeed, as Wedbush’s Michael Pachter points out, Strategy is trading at around twice the value of its BTC assets, whereas GameStop is currently worth around two and a half times its cash.
It should also be borne in mind, however, that while Strategy’s non-Bitcoin business has dwindled to a trickle, this is not the case for GameStop, which posted revenues of $1.283 billion and EPS of $0.30 in Q4 2024.
To properly assess the outlook for GameStop shares, it will also be important to stay tuned to analysts’ opinion updates over the next few days, bearing in mind that for now, they’re averaging a $10 target for the stock—nearly 65% below last night’s closing price.
We should also bear in mind that the more Bitcoins GameStop buys, the more its share price will be influenced by that of the cryptocurrency—a factor not to be overlooked given that BTC has been reluctant to set new records for several months now.
GameStop Could Just Be Short-Term Noise: What Are the Alternatives for Long-Term Gains?
GameStop’s purchase of Bitcoins undoubtedly increases the share’s appeal for speculators and short-term traders, who will find it more volatile—a source of both upside and short-sale opportunities.
As for the long-term impact, this will essentially depend on Bitcoin’s ability to emerge from its current phase of indecision. In the final analysis, the question is whether GME will benefit from its transformation from a declining chain of video game stores to a Bitcoin vault.
In any case, the only guarantee is that GameStop will remain an ultra-speculative stock. So investors looking for high-potential shares would do well to look for opportunities with a less uncertain investment thesis.
That’s where InvestingPro’s ProPicks investing strategies can prove valuable.
Each month, the ProPicks AI’s ’Tech Titans’ strategy selects 15 top U.S. tech stocks using advanced analysis of key financial metrics.
Over the past 12 years, it has delivered +1,944% returns, consistently outperforming the market with a moderate risk profile.
Source: InvestingPro
Despite market turbulence, plenty of strong opportunities exist—and InvestingPro helps you find them. Subscribe now and get AI-powered insights to stay ahead of the game.
***
Disclaimer: This article is written for informational purposes only. It is not intended to encourage the purchase of assets in any way, nor does it constitute a solicitation, offer, recommendation or suggestion to invest. I would like to remind you that all assets are evaluated from multiple perspectives and are highly risky, so any investment decision and the associated risk belongs to the investor. We also do not provide any investment advisory services.