GameStop Stock Continues to Fall Ahead of Earnings

GameStop calls have been popular of late

Deputy Editor
Sep 6, 2022 at 11:27 AM
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GameStop Corp. (NYSE:GME) is preparing for the release of its third-quarter earnings, due out after the market closes tomorrow, Sept. 7. Wall Street is anticipating GameStop to report losses of 38 cents per share on revenue of $1.27 billion. Below we will take a look at how the video game retailer has fared on the charts, and dive into what the options market is pricing in for the stock's post-earnings move.

Last seen down 6.7% at $25.54, GameStop stock is coming off of its third-straight weekly loss, and has turned in just one positive session in the last 14. Its 10-day moving average has helped push the equity lower in the last few weeks, though the $25 level caught today's pullback. A far cry away from its meme stock heyday, GME sports a 31.5% year-to-date deficit. 

GME Chart September 6

Moving onto GME's earnings history, the specialty retailer has closed lower the day after reporting in five of the past eight quarters, though it rose 3.5% and 10.4%, respectively, after its last two reports. Over the past two years, the shares have moved an average of 15% the day after earnings, regardless of direction. This time around, the options market is pricing in a larger 19% swing.

Options activity is muted ahead of the event, but traders' appetite for bullish bets is higher than usual. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), 2.50 calls have been bought for every put in the last 10 days. Plus, GME's 10- and 50-day call/put volume ratios each rank in the 78th percentile of its annual range, showing calls have been bought over puts at a relatively faster-than-usual pace during the past two weeks.

Meanwhile, the number of brokerages covering GameStop stock has dwindled to just two, recommending a "hold" and "strong sell." The 12-month consensus target price of $13.58 is a 46.3% discount to GME's current level of trading.

 

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