GameStop NYSE: GME made a potentially bullish $2 billion announcement, but investors should be skeptical.
The company sold those shares not too long ago, building up cash to move forward. Assuming a buyout follows, investors may be left wondering what is going on.
The truth is that GameStop’s board is trying to play the market, initiate a short squeeze, and bring its price back into action.
$2 billion is a lot of money, worth more than 20% of the early June market, and a strong signal of the board’s confidence. GameStop also ended the quarter with $8.4 billion in cash (including cash equivalents and securities sold), so it has the balance sheet strength to return capital.
Well, with eBay NASDAQ: EBAY still (unknowingly) on the table, spending $2 billion to buy back shares seems inconsistent with the company’s broader strategy. Analysts are already skeptical that the company can take over. As it stands, eBay’s board rejected the bid, but GME CEO Ryan Cohen is still pursuing it anyway. What started as a 5% stake in February 2026 has grown to about 7.8% ownership through stocks and options.
Ironically, investing in eBay is among Mr. Cohen as CEO of GameStop. The stock is up nearly 30% from its February average, driven by its dramatic turnaround. eBay is integrating AI, driving engagement, ads, and ad revenue, while focusing on its most profitable markets, including collectibles. It gains more exposure even if GameStop fails.
If we take success, the question then turns to execution, which is another questionable part of this story that can cause the failure of both companies. So, $2 billion in share sales is a good thing, but only if it follows through.
GameStop Returns to Growth, Collectibles Leads
GameStop posted a decent fiscal Q1, with revenue up 14% to more than $835 million, beating analyst estimates of $767 million. Energy is driven entirely by inventory, as core hardware and software businesses continue to contract.
Hardware sales fell more than 3%, led by a 13% decline in software sales, while collections grew 65%. Collectables accounted for around 42% of revenue and will be a significant segment going forward. Gaming hardware probably won’t go away, but gaming is shifting to more cloud-based applications, which means a reduced market size for legacy products, hardware, and software.
Margin news is the bright star of the report. GameStop’s revenue growth has been compounded by poor performance, which has led to lower-level strength.
Core earnings grew by triple digits to match the company’s record, even when adjusting for a single charge. Looking ahead, the company will likely maintain profitability, raising another question. If GameStop is on a path to continued growth, why does it need eBay, other than to gain more exposure?
Balance brings more good news. A strong quarter led to positive cash flow and an increase in reserves. The company’s net worth, excluding any lines of credit, is approximately $9.7 billion, which is roughly equal to the company’s market cap. Debt is also high, but remains very low, with an equity of less than 1x.
Short Squeeze Possible
GameStop Stock Forecast Today
$13.50
-39.43% LowReduce
Based on 2 Analyst Ratings
| Current Price | $22.29 |
|---|---|
| High Forecast | $13.50 |
| Average prediction | $13.50 |
| Low Prognosis | $13.50 |
GameStop Stock Forecast Details
Analysts, institutional data, and short interest suggest a short rally, if not a squeeze, is likely.
Analyst coverage remains nonexistent, with only two tracked by MarketBeat. With one Sell rating and one Hold rating, the consensus rating is Reduce, but there was an optimistic discussion after the release of Q1 earnings.
Doubts about buying shares were dispelled by comments on the unexpected profit and earnings potential and what it could mean in the future.
Institutional data is clearly powerful, as it owns about 30% of the stock and is accumulating shares. Low ownership or not, accumulation is a bullish sign that can put pressure on short sellers.
Short interest is an important factor. It remains up about 14% since the beginning of June, enough to achieve gains in the absence of a bullish catalyst. Q1 financial results provide such a catalyst and may lead to payouts in future quarters. Until then, GME shares are likely to trade within the established trading range as clarity on the company’s goals, strategy, and operations grows.
GameStop’s risks include eBay and its transformation. A bigger, more efficient competitor, its established business has regained momentum. It can dominate the collectibles market and have AI to help it. If GameStop can buy eBay or develop a competitive plan, the stock price will remain under pressure until something else changes.
Catalysts include the development of eBay’s strategy, continued operations in the core business, and the re-emergence of Bitcoin. Down more than 40% since the purchase, Bitcoin’s performance has a significant impact on the company’s net worth and the return it has received on its capital. The cash balance is great but it comes at the expense of shareholder value; The loss of BTC destroys the value.
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