Shares of GameStop (NYSE:GME) are in full-focus, as the company is set to report first-quarter earnings tomorrow, June 1. The Motley Fool points out that GME stock has declined in 11 of its past 14 earnings reports. During its last earnings, GameStop closed higher by 3.5%.
In addition, June 2 will mark an important date for investors of GME as well. On that day, the company will host its annual stockholder’s meeting. Up for vote is a proposed 3-for-1 stock split. While a stock split doesn’t fundamentally affect a company, some investors believe that a lowered price will make buying shares more accessible for retail investors. Stock splits are also generally seen as a positive catalyst.
Meanwhile, GameStop’s short interest as a percentage of float is at its highest value since February of 2021. The figure comes in at a high 23.8%, up from 21.4% last month. Furthermore, the dollar value of the shares sold short is $1.49 billion, which would take 3.5 days to fully cover. If the meme stock reports impressive earnings, shorts may be forced to cover their position, which could drive up the stock price.
With that in mind, let’s take a look at three metrics that investors should focus on when GameStop reports earnings.
Three Key Things to Watch With GME Stock
Investors should focus on revenue, earnings per share (EPS), and guidance. For Q1, analysts are expecting revenue of $1.32 billion. The high estimate lies at $1.35 billion, while the low estimate tallies in at $1.24 billion.
For EPS, analysts are expecting a loss of $1.45. The high estimate is a loss of 25 cents, while the low estimate is a loss of $2.49. It seems that GameStop won’t achieve profitability this quarter as the Federal Reserve raises interest rates. This year, many investors have fled to profitable companies, as higher interest rates reduces the present value of future cash flows when all other factors are held constant.
Finally, investors should keep an eye on the company’s guidance. For the second quarter, analysts are expecting revenue of $1.22 billion. For EPS, analysts are expecting a loss $1.48. The estimated Q2 guidance shows a decline in both revenue and EPS. However, GME stock could increase in value if these estimates are beat.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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