Video game retailer GameStop (GME 0.14%) used to be hot stuff. The company nearly went out of business during the lockdowns of 2020, but the stock caught a second wind in 2021. Driven by social media hype and a new leadership team, GameStop's stock soared to nearly $87 per share. That's up from $3.36 three months earlier, creating a price spike of a cool 1,000%.
But the surge didn't last, and GameStop's stock has been trending lower ever since. As of June 13, investors have taken a 74% haircut from the very top in January 2021.
Are you watching the beginning of the end for GameStop's retail empire, or is the stock poised for another dramatic recovery in 2025? Let's find out.
Image source: Getty Images.
Profits are up, but is the cash register ringing?
Let's stop looking at the stock charts and break out GameStop's financial reports instead. How is the company doing in the video game and collectibles markets nowadays?
GameStop's profits have been hit or miss in recent years. The company is currently enjoying an upswing, with positive free cash flows and adjusted earnings over the last four quarters.
At the same time, GameStop's top-line sales have been swooning for a decade now. The company was struggling to produce sales growth and higher store traffic before the coronavirus pandemic swept in. Here's what the revenue chart looks like over the last three years:
GME Revenue (TTM) data by YCharts. TTM = trailing 12 months.
Taken together, the plunging sales and rising profits must mean that the company is doing something right. I see higher profit margins in these charts, despite the onslaught of games being sold as downloads or streaming services in recent years.
GameStop gives investors the silent treatment
Unfortunately, it's difficult to say what's actually working for GameStop. The company has been publishing bare-bones earnings reports for years, containing the bare minimum of required financial data and no management commentary to speak of. CEO Ryan Cohen and his team stopped holding earnings calls in 2023. And the newsroom is full of financial restructuring notices, including several debt refinancing moves and the purchase of 4,710 Bitcoin (BTC -0.08%).
A closer review also reveals two cash-raising stock sales in 2024. The company is also looking to sell its French operations and has sold its Canadian operations. The latest earnings report noted that the Canadian transaction was complete. This segment accounted for 7% of GameStop's total sales in the first quarter of fiscal year 2026, but all of GameStop's international operations are running at a loss.
GameStop's business is morphing into a collectibles corner
If you dive deep into GameStop's financial filings, you can run across some enlightening details. The latest 10-Q report offered this explanation for the company's widening profit margins:
"The increase in gross profit, as well as gross profit as a percentage of net sales, is primarily due to a shift to higher margin product categories, specifically collectibles and preowned hardware and accessories. Sales of collectibles as a percentage of total net sales increased to 28.9% for the three months ended May 3, 2025, compared to 15.5% in the prior year."
So, GameStop is essentially becoming a store for collectibles and used gaming hardware. This strategy shift makes sense because it's hard to set up an e-commerce site that can match the hands-on shopping experience for collectible items in a physical store. The brand name and store network are arguably GameStop's strongest assets.
At the same time, the company is losing its connection to the gaming community. You can find used controllers and gaming mice elsewhere. Will GameStop eventually become something more like CollectibleStop or GameSwag? Whether the company changes its name or not, that's where the business plan seems to be heading.
Should investors take a chance on GameStop's next move?
What does all this mean for GameStop investors?
The richer profit margins can compensate for the plunging sales trend, but only to a certain degree. Management is not doing its shareholders any favors by limiting their communications to the bare minimum, and then there's the unexplained appearance of Bitcoin holdings on the balance sheet. Will GameStop copy the Strategy strategy, converting all its cash into Bitcoin and taking on more debt just to finance more cryptocurrency shopping sprees? Your guess is as good as mine, as Mr Cohen's team isn't saying much about this financial tactic (or anything else).
If GameStop has found a cure for all its problems, the stock could certainly rise over time -- but how am I supposed to figure out what's happening behind closed and locked doors? All things considered, I can't recommend anything more than a speculative little bet on this tight-lipped company. I'm certainly not buying any GameStop stock for my own portfolio right now.
