GME Posts Q1 Miss, Surge in E-Commerce Sales

Calls are still preferred among options traders

Jake Scott
Jun 10, 2020 at 10:30 AM
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The shares of GameStop Corp. (NYSE:GME) are exploring both sides of the breakeven this morning, last seen up 1% at $5.04, after reporting first-quarter losses of $1.61 on revenue of $1.02 billion -- both of which were well below Wall Street's estimates. Additionally, the video game retailer saw same-store sales fall 17%, although this number excludes stores that were closed due to the coronavirus pandemic. The reason for the stock's pivot higher, however, seems to be the 519% surge in e-commerce sales also reported for the quarter.

A look back shows GME hitting an all-time low of $2.57 toward the beginning of April, though it quickly bounced to an annual high of $6.47 just one week later. Since then, the equity has pulled back, though the $4 level has acted as a floor in recent months. Today, GME is once again running up to its 320-day moving average, which has helped guide the stock lower since a late-2015 bear gap. 

Still, analysts are approaching GME with a good amount of pessimism. All six brokerages covering the stock rate it a "hold" or worse, with no "buy" rating in sight. Meanwhile, the 12-month consensus price target of $3.86 is a 27.6% discount to current levels, and could signal that a flurry of upgrades and/or price-target hikes could be on the horizon.

In the options pits, on the other hand, there is a strong preference for calls. GameStop's 50-day call/put volume ratio of 1.95 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) ranks in the highest percentile of its annual readings. This suggests there is an extremely healthy appetite for long calls of late.

Some of these bullish bets could be shorts hedging against any unexpected upside risk though. The 55.59 million shares sold short represent an eyebrow-raising 97.9% of GME's available float. In other words, it would take almost three weeks to cover these pessimistic positions at the equity's average daily pace of trading. 


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