GameStop (NYSE: GME) faced a challenging situation on September 11, as its shares dropped by 15.09% to $19.95 during market opening hours following a shaky Q2 earnings report. Although the company narrowly surpassed EPS expectations with earnings of $0.01 per share (versus expected loss of -$0.09), it was not sufficient to counterbalance other concerning results.
The company witnessed a significant 31.9% year-over-year decrease in revenue to $790 million, falling short of projections by $106 million. Additionally, the adjusted EBITDA stood at a negative $18 million, a stark contrast to the positive $1 million from the previous year.
GameStop is currently dealing with fundamental challenges, and its stock is struggling to maintain the $20 threshold, which is seen as critical support by many analysts. Without stabilization, the company may face even more turbulent times ahead.
GME shares are currently trading at the lower end of their 52-week range, while the broader market, exemplified by the S&P 500 Index, is performing better. In the past month, GME has been fluctuating between $19.88 and $25.02, with the stock now near the lower boundary of this range. A support level at $20.09, backed by a trend line on the daily chart, is crucial.
Should GME fail to reclaim and retain this support, investors might witness an intensified sell-off, potentially pushing the stock into riskier zones. The upcoming trading sessions will be crucial as GameStop strives to remain afloat.
Wedbush analyst Michael Pachter is cautioning investors about GameStop shares, maintaining a “Sell” rating on GME since 2021. Pachter had advised investors to divest before earnings due to the company’s reluctance to engage with shareholders.
Given the prevailing uncertainty and Pachter’s perspective along with GME’s current stock performance, investors are advised to proceed cautiously or consider exiting their positions.
Please note that the information provided here should not be construed as investment advice, as investing carries inherent risks, and capital is always at stake.