In a recent financial setback, GameStop (NYSE: GME) faced a challenging day on September 11 as its shares dropped by 15.09% to $19.95 at market open after a turbulent Q2 earnings report. Despite slightly exceeding EPS expectations with a modest $0.01 per share (versus anticipated -$0.09 loss), the company struggled with significant declines in revenue, which plunged by 31.9% year-over-year to $790 million, falling short of projections by $106 million. Furthermore, adjusted EBITDA sank to a negative $18 million from the previous year’s positive $1 million.
GameStop now confronts deep-seated structural issues, with its stock precariously holding onto the $20 threshold—a crucial support level according to numerous analysts. Failure to stabilize could signify even tougher times ahead for GME.
Currently, GME shares are closer to the bottom end of their 52-week range, lagging behind the broader market exemplified by the S&P 500 Index trading at higher levels. Throughout the past month, GME has been fluctuating within a broad price range of $19.88 to $25.02, currently edging towards the lower boundary of this range. A critical support level at $20.09 is vital to observe, marked by a trend line on the daily chart.
If GME fails to reclaim and sustain this support level, investors might witness an accelerated sell-off, pushing the stock into risky territory. The upcoming trading sessions will be crucial as GameStop strives to remain above water.
Wedbush analyst Michael Pachter stands cautious on GameStop shares, maintaining a “Sell” rating on GME since 2021, after downgrading it from a “Hold,” signaling no change in opinion. Pachter previously advised investors to exit before earnings, citing the company’s reluctance to engage with shareholders.
Given the existing uncertainties surrounding GameStop and Pachter’s stance, coupled with the current price action of GME stock, investors may need to proceed cautiously or consider exiting their positions.
Please note that the information provided should not be interpreted as investment advice, as investing carries inherent risks to your capital.