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Recent reports suggest GameStop is exploring alternative investments and speculation grew after CEO Ryan Cohen shared a photo with Michael Saylor, co-founder of MicroStrategy.
GameStop Corp (GME) started the week on firm footing ahead of its fourth-quarter earnings report on Tuesday, where investors will look for updates on its store rationalization and potential investment in cryptocurrencies.
GME gained 3.5% on Monday, adding to the 7.4% gains last week.
According to estimates from Koyfin, the video games retailer is expected to report a 17.6% fall in adjusted sales to $1.48 billion.
Analysts also anticipate adjusted earnings to narrow to $0.08 per share from $0.22 per share in the year-ago quarter.
GameStop's revenue fell 20% in the third quarter to $860 million. However, it managed to post a net profit of $17.4 million, compared to a net loss a year ago, thanks to various cost-saving efforts, including shutting down some stores and a push towards higher-margin items.
The Q3 results were seen as positive, given that the retailer has struggled recently due to lackluster video game sales and increased competition from e-commerce platforms such as Amazon.com (AMZN) and eBay (EBAY).
In Tuesday’s report, most analysts will look for comments on the company's cryptocurrency play.
GameStop CEO Ryan Cohen confirmed last month that he received a proposal from Strive Asset Management to convert the retailer's nearly $5 billion cash reserve into Bitcoin. However, he has not indicated whether the company will pursue the idea.
In February, reports suggested GameStop was exploring alternative investments, including Bitcoin and other cryptocurrencies. Speculation grew after Cohen shared a photo with Michael Saylor, co-founder of MicroStrategy (MSTR), the largest corporate holder of Bitcoin.
Whether the company confirms or not, the stock could see big swings. GME is a well-known “meme stock” — an equity whose price moves widely on social media and retail investor commentary rather than business fundamentals.
On Stocktwits, retail sentiment climbed into the 'bullish' territory from 'neutral' the previous day. Posts around the stock jumped over 400% in the past 24 hours.
One bullish user said they think GameStop could report a cash balance of over $6 billion, while another noted expectation of an $80 million-$100 million profit for the full year.
In response to a Stocktwits post about GME expectations, several users said they were holding the stock ahead of the earnings report.
GME shares are down over 18% year to date.
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