TLDR
- GameStop beat Q4 earnings expectations with $0.29 per share despite lower sales
- Board unanimously approved adding Bitcoin as a treasury reserve asset
- Stock jumped 13% in premarket trading following the announcement
- Company has closed numerous stores and completed divestiture in Italy and Germany
- Analysts remain skeptical about GameStop’s long-term business strategy
Recent Financial Performance
GameStop reported mixed financial results for its fourth quarter ended February 1, 2025. The video game retailer posted net sales of $1.28 billion. This figure fell below analyst expectations of $1.48 billion.
However, the company’s adjusted earnings significantly outperformed forecasts. GameStop reported earnings of 29 cents per share, far exceeding the 8 cents per share that analysts had predicted.
Net income reached $131.3 million for the quarter. This was nearly four times higher than the $33 million analysts had expected. The strong bottom-line performance came despite weaker sales figures.
For the full fiscal year ended February 1, GameStop reported total net sales of $3.82 billion. This was below the $4.02 billion that market watchers had anticipated.
Strategic Pivot to Bitcoin
The biggest market mover wasn’t the earnings beat. It was the company’s unexpected announcement regarding cryptocurrency.
GameStop revealed that its board unanimously approved an update to its investment policy. The new policy will add Bitcoin as a treasury reserve asset.
In its filing, the company stated that “a portion of our cash or future debt and equity issuances may be invested in Bitcoin.” GameStop has not set any maximum limit on the amount of Bitcoin it may accumulate or sell.
This strategic pivot mirrors the approach taken by Strategy (formerly MicroStrategy). That company has become the largest corporate holder of Bitcoin.
The cryptocurrency move comes amid increased focus on digital assets by U.S. President Donald Trump. This attention has boosted interest in cryptocurrencies broadly.
Market Reaction
Investor response to the Bitcoin announcement was strongly positive. GameStop shares jumped 13% to $28.75 in premarket trading on Wednesday.
The stock had closed down 0.8% on Tuesday at $25.80. Shares had traded as low as $24.99 during Tuesday’s session.
GameStop stock has risen 64% over the past 12 months. Much of this gain followed the return of investor Keith Gill, known as “Roaring Kitty,” who expressed his continued belief in GameStop during a YouTube livestream in June 2024.
Despite the yearly gain, the stock is down 19% year-to-date through Tuesday’s close. Bitcoin itself is currently trading around $88,000, down nearly 20% from its January peak.
Business Challenges
GameStop continues to face questions about the profitability of its core business. The company has been closing physical stores amid the ongoing shift to digital gaming.
The retailer confirmed it has completed its divestiture in Italy. It has also wound down store operations in Germany.
As of February 1, GameStop operated 3,203 stores across the U.S., Canada, Australia, New Zealand, and France. This represents a significant reduction from previous years.
The company’s aggressive cost-cutting measures have helped more than double its net income in the fourth quarter. This improvement came despite sales dropping about 30% compared to the same period last year.
Analyst Perspectives
Analysts remain skeptical about GameStop’s long-term strategy. Michael Pachter, a managing director at Wedbush Securities, expressed doubt about the company’s move into trading cards.
“It is unfathomable that they will ever turn their core business (selling games) around by offering trading cards in their stores,” Pachter told Barron’s. He noted the company’s “utter lack of competitive advantage” in this “wildly fragmented” business.
Wedbush analysts maintained their Underperform rating on GameStop stock. They set a 12-month price target of $10, well below current trading levels.
The analysts described GameStop’s entry into cryptocurrency as “an unsubtle attempt to emulate the success of MicroStrategy.” They noted that MicroStrategy “trades at less than 2x the value of its Bitcoin holdings.”
Dan Coatsworth, investment analyst at AJ Bell, commented on the stock movement. “Retail operations aren’t the reason why GameStop’s shares are flying – they never are. This time it’s about the company’s move into bitcoin.”
Capital.com analyst Daniela Hathorn warned that the company’s shares could see increased volatility by being tied to the digital currency.
Pachter suggested that GameStop’s current stock price, trading around 2.5 times cash, indicates that investors have faith in CEO Ryan Cohen’s investment decisions. Cohen has been leading the company’s strategic shift.
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