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GME Stock: 3 Things to Watch When GameStop Reports Earnings

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GameStop (NYSE:GME) stock is in full focus today as the company gets ready to report third-quarter earnings next week on Dec. 7. GameStop is currently in the middle of executing a cost-cutting plan in orde…

Source: 1take1shot / Shutterstock.com

GameStop (NYSE:GME) stock is in full focus today as the company gets ready to report third-quarter earnings next week on Dec. 7. GameStop is currently in the middle of executing a cost-cutting plan in order to achieve short-term profitability. That includes a reduction of cash compensation and layoffs across the company. As a result, both Chairman Ryan Cohen and former CEO George Sherman have agreed to receive no compensation.

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Meanwhile, the memory of GameStop’s momentous short squeeze in 2021 is lingering fresh on the minds of GME stock investors. As of Nov. 15, there were a total of 54.66 million shares sold short with a dollar value of $1.51 billion. That’s equivalent to a short interest as a percentage of float of 21.25%, which is high enough to drive a squeeze.

Alongside that, data from S3 Partners shows that only 3 million shares “remain available to be sold short.” That means that only 5% of shares made available by investors to be sold short are not accounted for, while the remaining 95% are already being used to cover shorts. S3 Managing Director Ihor Dusaniwsky explained the following:

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“The vast majority of GME short selling has already been done, existing short sellers will be able to add some more exposure to their positions and new short sellers may enter the trade — but there is not enough stock left to borrow to execute large trades in the stock.”

With that said, let’s take a look at what Q3 earnings have in store for GameStop.

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GME Stock: 3 Things to Watch When GameStop Reports Earnings

First, investors should watch for GameStop’s revenue in the upcoming report. Analysts expect the video game retailer to report Q3 revenue of $1.35 billion, up 4.5% year-over-year (YOY). The high estimate lies at $1.41 billion while the low estimate is $1.3 billion. A beat on the high end would surely help drive GME stock higher.

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Next up is EPS. GameStop is expected to be unprofitable, with analysts forecasting an EPS loss of 28 cents, compared to the loss of 35 cents a year ago. The high estimate is a loss of 23 cents while the low is a loss of 35 cents.

Finally — and maybe most importantly — is guidance. For Q4, analysts expect revenue of $2.4 billion, up 6.4% YOY, as well as an EPS loss of 23 cents. That would bring full-year revenue up 4.3% YOY to $6.27 billion and full-year EPS to a loss of $1.37.

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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.

Eddie Pan specializes in institutional investments and insider activity. He writes for InvestorPlace’s Today’s Market team, which centers on the latest news involving popular stocks.

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