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GameStop Stays Tight-Lipped Ahead of Q3  Earnings Report

GameStop shares are higher on Tuesday as the company prepares to report third-quarter earnings.
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Investors will be watching GameStop  (GME) - Get GameStop Corp. Class A Report on Wednesday as the videogame retailer and meme-stock sensation is scheduled to report earnings.

Shares of the Grapevine, Texas, company at last check were up 4.5% to $174.57. That's a bit more than a third of its 52-week high of $483, set in late January.

Analysts surveyed by FactSet expect the company to report a fiscal-third-quarter adjusted net loss of 52 cents a share on sales of $1.19 billion. 

GameStop became a meme sensation after a group of Reddit users from the WallStreetBets channel noticed that there was a very high level of institutional short interest on the stock. Short sales are bets that a stock's price will drop.

Stock for GameStop, AMC Entertainment Holdings  (AMC) - Get AMC Entertainment Holdings, Inc. Class A Report and Bed Bath & Beyond  (BBBY) - Get Bed Bath & Beyond Inc. Report soared to records amid a social media frenzy that in many ways was created by the investors themselves. 

Last month, a federal court in Miami dismissed a lawsuit brought by retail investors, alleging that Citadel Securities and online-trading platform Robinhood  (HOOD) - Get Robinhood Markets, Inc. Class A Report conspired to halt meme-stock trading in January. 

On Jan. 28, Robinhood put limits on trading stocks that included these companies due to what it claimed to be the prohibitively expensive cost of having so many trades all at once.

In October, the Securities and Exchange Commission concluded in a report that online brokerages were using the practice of payment for order flow and the so-called gamification of stock trading to encourage more engagement from retail investors.

The report also dismissed popular conspiracy theories that so-called naked shorting caused the GameStop price surge and that players like Citadel securities were buying up GameStop to hedge against call options they were writing.

In a short sale, a trader borrows stock and sells it, hoping to buy it back at a lower price, return the stock to its owner, and pocket the profit on the trades. Naked shorting is an illegal practice of selling short shares that aren't available to borrow. 

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Bloomberg reported Monday that Citadel updated its liquidity terms for all investors, reverting to a formula that under certain circumstances limits quarterly withdrawals to 6.25% from the previous 10%.

For its part, GameStop has played things close to the vest, keeping earnings calls limited to prepared to remarks, with no question-and-answer session with analysts. 

During the company's second-quarter earnings call, Chief Executive Matt Furlong said the company would not provide formal guidance.

"We now have unified leadership, fully focused on two long-term goals: delighting customers and delivering value for stockholders," he said.

Furlong said the company continued to expand its fulfillment network by adding a 530,000-square-foot facility in Reno, Nev., which he said was expected to be operational next year.

Wedbush analyst Michael Pachter told Barron’s he expected the company to hold another brief earnings call.

“Until supply of consoles improves, it’s going to be hard to see a marked improvement in their business,” Pachter said.

In November, Barron's found that the company shares rose by a factor of 9 in the past year. 

It has raised equity twice, once in April and once in June, in what totaled 8.5 million new shares or $1.6 billion. 

The company now has over $1.7 billion in cash, nearly double what it had last year.