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Will GameStop Stock Finally Break the Curse of Earnings Season?

By Rick Munarriz – Sep 3, 2021 at 10:05AM

Key Points

  • GameStop has fallen the day after posting quarterly results in 10 of its last 11 reports.
  • The sell-offs are getting worse with GameStop as a meme stock, tumbling 27% and 34% following its last two reports.
  • GameStop shares have still trounced the market in that time, but it does lead one to wonder why earnings season has historically been a letdown for investors.

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The video game retailer reports next Wednesday. The stock has fallen following 10 of its last 11 quarterly reports.

GameStop (GME -1.98%) reports quarterly results next week. It steps up with fresh financials shortly after Wednesday's market close. A review of the video game retailer's unfortunate performance during earnings season is probably in order. 

GameStop is one of this year's hottest stocks. The video game retailer's stock is an 11-bagger in 2021, even though it has surrendered more than half of its late January peak. Draw the starting line all the way to the beginning of last year and we're looking at a scintillating 35-bagger. However, there's a cheat day to bullish run every three months. It's called the day after earnings. 

A group of seven friends playing video games.

Image source: Getty Images.

Trying to avoid another Black Thursday

GameStop has a legion of passionate retail investors, and it's doing a lot of things right to reinvent itself as the sale of physical software media rides off into the digital sunset. It's brought in some future-minded visionaries to chart a course of reinvention. 

However, every three months GameStop checks in with a financial update, and nearly every single time -- at least over the past three years -- it doesn't end well. It's as if reality rushes in like a balloon in search of a shiny pin. Let's check out the last 11 afternoons that GameStop offered up its latest performance metrics, and what the shares did the very next trading day.

  • Nov. 29, 2018: down 6.7% the next day
  • April 2, 2019: down 4.7%
  • June 4, 2019: down 35.6%
  • Sept. 10, 2019: down 9.8%
  • Dec. 10, 2019: down 15.1%
  • March 26, 2020: down 4.3%
  • June 9, 2020: up 2.2%
  • Sept. 9, 2020: down 15.2%
  • Dec. 8, 2020: down 19.4%
  • March 23, 2021: down 33.7%
  • June 9, 2021: down 27.2%

Bulls will rightfully argue that they don't mind losing the battles if they win the war, and the bears are clearly smarting here. However, how confident will you be holding GameStop at the close of Wednesday next week when history has been unkind the following day? 

We're talking about a stock that has fallen in response to 10 of the past 11 financial updates. The average decline -- including that rare day in the middle of that run with a 2.2% increase -- is clocking in at 15.4%. The pain isn't getting any easier, with double-digit percentage hits for each of the last four quarters. 

This year has been great, but how shocking must it be to see that the stock has fallen by 34% and then 27% the two times in this calendar year when GameStop has pushed out its quarterly results? Even with the opportunity to spin its performance in the subsequent earnings call, it winds up whiffing 91% of the time over the past 11 reports.

Will it be different this time? It can be. No winning or losing streak lasts forever. The bullish counter will always be that even if you go back to that fateful late November day in 2018 when this odd phenomenon started that the stock has popped 16-fold in that time. However, market timers that have steered clear of this video game stock when it reports have made out even better. Sometimes history packs a cheat code. Let's see if GameStop can crack the code this time. 

Rick Munarriz has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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