It's easy to see why GameStop (GME 3.71%) shareholders were feeling pretty good heading into the holiday weekend. The stock moved sharply higher in the last three trading days, a whopping 54% surge in that time. Short interest has nearly doubled year to date, adding fuel to a potential short-squeeze fire. 

The rub is that the video game retailer reports its fiscal first-quarter results shortly after Wednesday's market close, and history hasn't been kind on that front for GameStop investors in recent years. The shares have declined in 11 of its past 14 quarters in the trading day following its earnings announcement. GameStop has a lot to prove this week. 

Two gamers playing on the same couch. One is clearly winning. The other one knows it.

Image source: Getty Images.

Playing to win

Earnings season has been burning season for GameStop. The stock has lost ground in all but three reports since late 2018. Here's what those post-report trading days have looked like:

  • Nov. 29, 2018: Down 6.7%
  • 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%
  • Sept. 8, 2021: Up 0.2%
  • Dec. 8, 2021: Down 10.3%
  • March 16, 2022: Up 3.5%

That works out to an average daily decline of 12.6% immediately after each of the past 14 reports. It's brutal, but there are a couple of things to consider here.

For starters, the stock has moved higher in two of the past three reports, although the stock initially opened lower on both of those trading days. The results didn't initially impress the market. However, it's encouraging to see that the stock started to move higher on those days by the closing bell. 

It's also a strange phenomenon. GameStop hasn't been a bad stock to own in the span of those 14 quarterly reports. It's nearly a 10-bagger in that time. It seems as if hard performance numbers have a way of resetting expectations before hype lifts the shares higher on slow news days. 

Expectations aren't necessarily high this time. Analysts see GameStop's revenue up a mere 3% from the prior fiscal-year's showing for the same quarter. Those same Wall Street pros see the chain's loss more than tripling to $1.45 a share.

It may seem like a low bar to clear, but GameStop has fallen short of analyst bottom-line targets for three consecutive quarters. Again, the stock did ultimately close higher two of those three times. 

There are some long-term concerns with the GameStop retail model. The shift to digital delivery of games has been a blow to the retailer's high-margin resale business. There's been recent buzz about GameStop dabbling in non-fungible tokens (NFTs) and digital currencies to take advantage of its captive audience of retail investors, but those markets have been reeling in recent weeks. 

GameStop's track record over the past four years has been problematic when it discloses its latest financials, but there's no denying that the stock has been a winner for investors who have held on through the poorly received reports. The company is still an undisputed leader in the realm of video game stocks and has a large-enough base of meme-stock investors to give it time to figure out its next act.

Another positive day of trading on Thursday following Wednesday afternoon's earnings report, and one can argue that GameStop has cracked the code to its earnings seasons curse.