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GameStop Stock Falls 10% in 3 Months: Time to Buy, Hold or Sell?
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Key Takeaways
GameStop stock dropped 10.4%, underperforming peers and trading below its 50 and 200-day averages.
GameStop acquired 4,710 Bitcoin after Q1, signaling digital-focused investments.
Shifts to digital gaming hurt hardware and software, which dipped 31.7% and 26.7%, respectively.
GameStop Corp. (GME - Free Report) has experienced a significant decline over the past three months, with its shares plummeting 10.4%, underperforming the Zacks industry's rally of 28.9%. The company also trailed the sector’s growth of 16.8% and the S&P 500's rise of 15.1% during the same period.
GME’s Past 3 Months’ Performance
Image Source: Zacks Investment Research
The recent decline in the GME stock’s price is led by sharp revenue declines in hardware and software sales in the first quarter of fiscal 2025 amid weakening demand and the shift to digital gaming.
Regional sales contraction, including a significant drop in Europe and exit from Canada, underscores core market weakness and strategic retrenchment. Asset impairments and restructuring costs have weighed on profitability, raising concerns about sustained earnings pressure in a competitive and evolving retail landscape.
GameStop has also underperformed its peers, including Best Buy Co., Inc. (BBY - Free Report) , Microsoft Corporation (MSFT - Free Report) and Sony Group Corporation (SONY - Free Report) .
In the past three months, Best Buy and Microsoft have rallied 3.3% and 30.5%, while Sony has declined 4.1%.
GME’s Performance vs. Peer Performance
Image Source: Zacks Investment Research
Closing at $24.26 in yesterday’s trading session, the GME stock stands 32.3% below its 52-week high of $35.81 reached on May 28. GameStop is trading below its 50 and 200-day simple moving averages of $26.27 and $26.02, respectively, signaling bearish sentiment in maintaining the recent performance levels.
GME Trades Below 50 & 200-Day Moving Averages
Image Source: Zacks Investment Research
The recent slide in the stock has contributed to GameStop’s discounted status. This leading video game retailer is currently trading at a compelling discount relative to its industry. The GME stock trades at a forward 12-month price-to-sales (P/S) ratio of 3.31, lower than the industry’s average of 3.75.
GME P/S Ratio (Forward 12 Months)
Image Source: Zacks Investment Research
GME trades at a premium to Best Buy (with a forward 12-month P/E ratio of 0.35) and Sony (1.80) but at a discount to Microsoft (11.87).
What’s Behind GME’s Dismal Stock Run?
GameStop’s stock has been under pressure following its disappointing first-quarter fiscal 2025 results, with total net sales plunging 16.9% year over year to $732.4 million. The decline was led by sharp drops in hardware and accessories sales, which tumbled 31.7% year over year to $345.3 million, signaling weakening demand for gaming consoles and accessories. Similarly, software sales sank 26.7% to $175.6 million, as customers increasingly opt for downloads and streaming over traditional physical games.
Regional performance further exposed GameStop’s weaknesses, with contraction in virtually all key markets. U.S. revenues, which account for the majority of the company's total revenues, declined 12.9% to $537.5 million, led by changing consumer behavior and a tough retail environment. In Canada, sales slid 10.3% to $38.2 million, and the company subsequently exited the market entirely. European operations fared even worse, plunging 47.4% to $74.8 million, as restructuring initiatives there took their toll.
Despite aggressive cost-cutting, GameStop’s operations remain unprofitable at the core level, with an operating loss of $10.8 million for the fiscal first quarter. Store-related costs continue to weigh heavily on the business, and the company’s fixed-cost structure leaves little room to adjust to the sharp declines in revenue and changing consumer trends.
Overall, steep category declines, regional market exits, and persistent operating losses paint a troubling picture of the company. As GameStop pulls back from key geographies and faces structural headwinds in physical gaming retail, questions about its ability to sustain relevance and profitability in an increasingly digital industry remain unresolved.
GME’s Strategy to Navigate Market Shifts
GameStop is in the midst of a strategic transformation, evolving from a traditional video game retailer into a technology-driven company that connects customers to games, entertainment, and a diverse assortment of lifestyle products. The company has been steadily strengthening its infrastructure and technology capabilities, aligning its operations with shifting consumer preferences and the growing digitization of both gaming and retail.
One of the standout achievements in the fiscal first quarter of 2025 was the remarkable growth of GameStop’s collectibles business. Collectibles revenues jumped 54.6% year over year to $211.5 million in fiscal first quarter, now representing 28.9% of total sales compared with 15.5% a year ago. This expansion reflects the company’s effective merchandising strategy and ability to tap into pop culture and lifestyle trends, attracting a broader, more engaged customer base beyond its core gaming audience.
Cost efficiency has also been a major focus for the company. In the fiscal first quarter, GameStop reduced its adjusted selling, general and administrative (SG&A) expenses by nearly 25%, bringing them down to $225.3 million from $299.5 million a year earlier. As a percentage of net sales, adjusted SG&A declined by 320 basis points to 30.8%, underscoring the company’s disciplined approach to streamlining operations.
The above-mentioned improvements contributed to a 3.4% increase in gross profit, which rose to $252.8 million, and a substantial 680-basis-point expansion in the gross margin, which reached 34.5%. Together, these gains demonstrate GameStop’s ability to optimize its cost structure while maintaining operational effectiveness.
The impacts of these efforts were clearly visible in the company’s bottom-line performance. Adjusted net income rose to $83.1 million from an adjusted loss of $36.7 million, while adjusted EBITDA improved to $38.6 million and adjusted operating income reached $27.5 million. These results reflect the success of GameStop’s restructuring initiatives and its progress toward sustainable profitability.
In addition to operational improvements, the company has significantly strengthened its financial position. At the end of the quarter, GameStop held more than $6.4 billion in cash, cash equivalents, and marketable securities, up from $1 billion a year earlier, supported by a strong free cash flow of $189.6 million and more efficient inventory management.
The company also made a bold move into digital assets with the acquisition of 4,710 Bitcoin shortly after the quarter-end, signaling its willingness to embrace emerging technologies and appeal to a digitally native customer base. With its solid liquidity, disciplined operations and strategic investments in new growth areas, GameStop is laying the groundwork to thrive in an evolving market and deliver long-term value to shareholders.
GME’s Earnings Estimates
Over the past 60 days, the Zacks Consensus Estimate for the current fiscal year has been raised by 28 cents to 75 cents a share. For the next fiscal year, the consensus estimate has moved down by 11 cents to 36 cents.
Image Source: Zacks Investment Research
How to Play GME Stock: Buy, Hold or Sell?
GameStop’s ongoing transformation efforts and cost discipline offer some encouraging signs, but they remain overshadowed by deep structural challenges and declining core revenues. The company’s retreat from key international markets, coupled with softness in its traditional business, points to a narrowing growth path.
While the surge in collectibles and a strong cash position provide near-term support, they may not be enough to offset long-term industry pressures. Given the uncertain trajectory and heightened volatility, investors who already hold GME should consider maintaining a neutral stance, while potential buyers may be better off waiting for stronger evidence of a sustainable recovery.
Image: Bigstock
GameStop Stock Falls 10% in 3 Months: Time to Buy, Hold or Sell?
Key Takeaways
GameStop Corp. (GME - Free Report) has experienced a significant decline over the past three months, with its shares plummeting 10.4%, underperforming the Zacks industry's rally of 28.9%. The company also trailed the sector’s growth of 16.8% and the S&P 500's rise of 15.1% during the same period.
GME’s Past 3 Months’ Performance
Image Source: Zacks Investment Research
The recent decline in the GME stock’s price is led by sharp revenue declines in hardware and software sales in the first quarter of fiscal 2025 amid weakening demand and the shift to digital gaming.
Regional sales contraction, including a significant drop in Europe and exit from Canada, underscores core market weakness and strategic retrenchment. Asset impairments and restructuring costs have weighed on profitability, raising concerns about sustained earnings pressure in a competitive and evolving retail landscape.
GameStop has also underperformed its peers, including Best Buy Co., Inc. (BBY - Free Report) , Microsoft Corporation (MSFT - Free Report) and Sony Group Corporation (SONY - Free Report) .
In the past three months, Best Buy and Microsoft have rallied 3.3% and 30.5%, while Sony has declined 4.1%.
GME’s Performance vs. Peer Performance
Image Source: Zacks Investment Research
Closing at $24.26 in yesterday’s trading session, the GME stock stands 32.3% below its 52-week high of $35.81 reached on May 28. GameStop is trading below its 50 and 200-day simple moving averages of $26.27 and $26.02, respectively, signaling bearish sentiment in maintaining the recent performance levels.
GME Trades Below 50 & 200-Day Moving Averages
Image Source: Zacks Investment Research
The recent slide in the stock has contributed to GameStop’s discounted status. This leading video game retailer is currently trading at a compelling discount relative to its industry. The GME stock trades at a forward 12-month price-to-sales (P/S) ratio of 3.31, lower than the industry’s average of 3.75.
GME P/S Ratio (Forward 12 Months)
Image Source: Zacks Investment Research
GME trades at a premium to Best Buy (with a forward 12-month P/E ratio of 0.35) and Sony (1.80) but at a discount to Microsoft (11.87).
What’s Behind GME’s Dismal Stock Run?
GameStop’s stock has been under pressure following its disappointing first-quarter fiscal 2025 results, with total net sales plunging 16.9% year over year to $732.4 million. The decline was led by sharp drops in hardware and accessories sales, which tumbled 31.7% year over year to $345.3 million, signaling weakening demand for gaming consoles and accessories. Similarly, software sales sank 26.7% to $175.6 million, as customers increasingly opt for downloads and streaming over traditional physical games.
Regional performance further exposed GameStop’s weaknesses, with contraction in virtually all key markets. U.S. revenues, which account for the majority of the company's total revenues, declined 12.9% to $537.5 million, led by changing consumer behavior and a tough retail environment. In Canada, sales slid 10.3% to $38.2 million, and the company subsequently exited the market entirely. European operations fared even worse, plunging 47.4% to $74.8 million, as restructuring initiatives there took their toll.
Despite aggressive cost-cutting, GameStop’s operations remain unprofitable at the core level, with an operating loss of $10.8 million for the fiscal first quarter. Store-related costs continue to weigh heavily on the business, and the company’s fixed-cost structure leaves little room to adjust to the sharp declines in revenue and changing consumer trends.
Overall, steep category declines, regional market exits, and persistent operating losses paint a troubling picture of the company. As GameStop pulls back from key geographies and faces structural headwinds in physical gaming retail, questions about its ability to sustain relevance and profitability in an increasingly digital industry remain unresolved.
GME’s Strategy to Navigate Market Shifts
GameStop is in the midst of a strategic transformation, evolving from a traditional video game retailer into a technology-driven company that connects customers to games, entertainment, and a diverse assortment of lifestyle products. The company has been steadily strengthening its infrastructure and technology capabilities, aligning its operations with shifting consumer preferences and the growing digitization of both gaming and retail.
One of the standout achievements in the fiscal first quarter of 2025 was the remarkable growth of GameStop’s collectibles business. Collectibles revenues jumped 54.6% year over year to $211.5 million in fiscal first quarter, now representing 28.9% of total sales compared with 15.5% a year ago. This expansion reflects the company’s effective merchandising strategy and ability to tap into pop culture and lifestyle trends, attracting a broader, more engaged customer base beyond its core gaming audience.
Cost efficiency has also been a major focus for the company. In the fiscal first quarter, GameStop reduced its adjusted selling, general and administrative (SG&A) expenses by nearly 25%, bringing them down to $225.3 million from $299.5 million a year earlier. As a percentage of net sales, adjusted SG&A declined by 320 basis points to 30.8%, underscoring the company’s disciplined approach to streamlining operations.
The above-mentioned improvements contributed to a 3.4% increase in gross profit, which rose to $252.8 million, and a substantial 680-basis-point expansion in the gross margin, which reached 34.5%. Together, these gains demonstrate GameStop’s ability to optimize its cost structure while maintaining operational effectiveness.
The impacts of these efforts were clearly visible in the company’s bottom-line performance. Adjusted net income rose to $83.1 million from an adjusted loss of $36.7 million, while adjusted EBITDA improved to $38.6 million and adjusted operating income reached $27.5 million. These results reflect the success of GameStop’s restructuring initiatives and its progress toward sustainable profitability.
In addition to operational improvements, the company has significantly strengthened its financial position. At the end of the quarter, GameStop held more than $6.4 billion in cash, cash equivalents, and marketable securities, up from $1 billion a year earlier, supported by a strong free cash flow of $189.6 million and more efficient inventory management.
The company also made a bold move into digital assets with the acquisition of 4,710 Bitcoin shortly after the quarter-end, signaling its willingness to embrace emerging technologies and appeal to a digitally native customer base. With its solid liquidity, disciplined operations and strategic investments in new growth areas, GameStop is laying the groundwork to thrive in an evolving market and deliver long-term value to shareholders.
GME’s Earnings Estimates
Over the past 60 days, the Zacks Consensus Estimate for the current fiscal year has been raised by 28 cents to 75 cents a share. For the next fiscal year, the consensus estimate has moved down by 11 cents to 36 cents.
Image Source: Zacks Investment Research
How to Play GME Stock: Buy, Hold or Sell?
GameStop’s ongoing transformation efforts and cost discipline offer some encouraging signs, but they remain overshadowed by deep structural challenges and declining core revenues. The company’s retreat from key international markets, coupled with softness in its traditional business, points to a narrowing growth path.
While the surge in collectibles and a strong cash position provide near-term support, they may not be enough to offset long-term industry pressures. Given the uncertain trajectory and heightened volatility, investors who already hold GME should consider maintaining a neutral stance, while potential buyers may be better off waiting for stronger evidence of a sustainable recovery.
GME currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.