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The Next 3 Catalysts for GameStop Stock

With an eye toward June, we list three short-term catalysts that could make GameStop shares soar again.

After several days in the red, GameStop  (GME) - Get GameStop Corp. Class A Report shareholders are anxiously awaiting the next catalyst that will send the stock sharply higher again. Lucky for them, June promises to be an eventful month for GameStop.

Here are three catalysts that may soon turn the tide for GameStop shares.

Figure 1: The Next 3 Catalysts for GameStop Stock

Figure 1: The Next 3 Catalysts for GameStop Stock

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1. GameStop's Q1 Earnings

On June 2, the company will hold its annual shareholder meeting. And GameStop is slated to report its first-quarter (Q1) results a few days later, on June 7.

Although many GameStop shareholders don't count the company's financial results as being their primary interest in the stock, earning reports tend to be a stock mover.

Even though Gamestop reported not-so-impressive results last quarter, GME shares still rallied more than 100% in the days following the earnings announcement. But it's worth remembering that, at the same time, GameStop's chair and largest investor, Ryan Cohen, bought 100,000 shares.

GameStop will need to report a loss per share above $1.22 to beat market estimates. In terms of revenue, roughly $1.32 billion is expected. Although the market anticipates an unimpressive quarter, it's likely that macroeconomic effects such as high inflation, supply-chain disruptions, and inventory management will continue to hurt GameStop's business.

Since Ryan Cohen took over as chair of the company, GameStop has stopped providing financial guidance during its earnings calls. This is a standard Cohen strategy — he believes guidance simply pleases Wall Street experts and undermines shareholder sentiment.

Based on the modest consensus for Q1, it's possible that GameStop will report an earnings beat — and if not in this quarter, eventually in a future quarter. When this happens, it will send shares higher.

2. GameStop's NFT Marketplace

GameStop has been exploring growth initiatives, from starting a nonfungible token (NFT) marketplace and other blockchain projects to planning for Web 3.0.

Let's dig deeper into the first initiative. GameStop will soon launch an NFT marketplace, confirmed during last quarter's earnings call. All backend work will be provided by its partner, Immutable X. Users will be able to trade in-game assets, such as items from games like Fortnite, via blockchain tokens on the Ethereum platform.

Immutable X recently released data on its NFT transactions in the first quarter of this year. This should get many GameStop shareholders excited:

GameStop reported that it will launch its NFT marketplace by the end of Q2, hopefully in July.

3. The GME Stock Split

This is perhaps the most anticipated catalyst for GameStop shareholders in June. Shareholders will vote on the proposed stock split of GameStop shares during the annual meeting.

Although the ratio of the split has not yet been announced, GameStop is counting on the event to increase the liquidity of its shares. Theoretically, a stock split does not add any value to a company. But major impacts can be seen in the options market, making them more accessible to retail traders — the big players behind GME's high trading volume.

As an example, a near-term, slightly out-of-the-money (OTM) GME call option contract — strike price $90, expiring on May 20 — currently costs $760. In the case of a three-for-one split, a similar near-term OTM call may sell for only $253.

Still, perhaps the biggest benefit of stock splits is psychological. Splits tend to impact investor sentiment and cause short-term rallies. Alphabet  (GOOGL) - Get Alphabet Inc. Class A Report, Amazon  (AMZN) - Get, Inc. Report, Tesla  (TSLA) - Get Tesla Inc Report, Nvidia  (NVDA) - Get NVIDIA Corporation Report, and Apple  (AAPL) - Get Apple Inc. Report are a few recent examples of stocks that have soared after a split.

But there's also the possibility that the stock split is part of a plan to camouflage another item that will be voted on during the annual shareholder meeting. The 2022 Incentive Plan, if approved, will allow 8 million shares of common stock to become available for issuance. According to GameStop, it is crucial that the plan be approved in order to continue to attract, retain, and motivate the company's high-quality management team.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)