The GME stock price fell by over 5% on Wednesday, marking its lowest point since November 26 as GameStop contended with a combination of sluggish sales and ongoing difficulties in the Bitcoin treasury sector.
Summary
- The GME share price declined following the earnings report.
- GameStop is grappling with slow growth and persistent issues within Bitcoin treasury firms.
- The weekly chart indicates the formation of a head-and-shoulders pattern for the stock.
GameStop’s stock fell to $21.5, down over 37% from its peak this year, reducing its market cap from $15 billion to $10 billion.
GameStop reported mixed financial results
The GME share price took a steep downturn after the company reported disappointing quarterly results, raising concerns about its strategy.
Its revenue declined to $821 million in the third quarter, down from $860 million during the same period last year.
This drop was largely driven by shifts in consumer behavior in the gaming sector, with many opting for game streaming and subscription services.
Simultaneously, the company’s transition to digital sales and collectibles is progressing slower than management had anticipated, as more consumers are choosing retailers like Amazon and eBay.
Moreover, GameStop’s strategy for accumulating Bitcoin (BTC) is not yielding the expected results. The value of its Bitcoin holdings concluded the quarter at $534 million, which has since decreased to $434 million. Demand for Bitcoin treasury firms has waned in recent months, with many, including Strategy and MetaPlanet, operating at a loss.
On a brighter note, the company has improved its profitability, with net income rising to $77 million from $17.4 million a year ago. This increase in profitability is attributed to cost-cutting measures, with selling, general, and administrative expenses dropping to $221 million from $282 million.
Another positive aspect is that GameStop boasts one of the strongest balance sheets in retail, with cash and equivalents increasing to $8.8 billion, current assets rising to $9.6 billion, and current liabilities decreasing to $932 million.
GME stock price technical analysis
The weekly chart reveals that the GME share price has faced downward pressure in recent months, dropping from a year-to-date high of $35.87 to $22.10.
A more detailed examination indicates the formation of a head-and-shoulders pattern, with the head at $35.80 and the right shoulder at $29. This pattern is commonly regarded as a bearish reversal signal in technical analysis.
Currently, GameStop’s stock is trading close to the neckline at $20.55 and remains below key trend indicators, such as moving averages and the Ichimoku cloud.
As a result, the stock is likely to continue its downward trend as sellers aim for the psychological threshold at $20.
