GameStop (NYSE:GME) is in full focus as the company gets ready to report second-quarter earnings after the market close today. Across the board, analysts expect revenue of $1.27 billion — implying year-over-year (YOY) growth of 7% — and an earnings per share (EPS) loss of 38 cents. During the same period last year, GameStop reported revenue of $1.18 billion and an EPS loss of 19 cents.
Meanwhile, shares of GME stock have fallen by more than 15% in the past five trading days. However, the stock does still carry a significant short interest as a percentage of float of 20.84%. That’s equivalent to 53.25 million shares short, or a monetary short value of $2.11 billion. As a result, a beat on earnings could send shares climbing.
Short interest can be perceived as both bullish and bearish. On one hand, it indicates that many market participants believe the stock will fall. But on the other hand, in the event of a positive catalyst like an earnings beat, it could also send GME stock higher; short sellers would have to capitulate and cover their positions by buying shares of the underlying stock.
GME Stock: GameStop to Report Earnings After the Market Close
GME short interest has fallen by 11% compared to the reading on July 31. At the current short interest of 20.84%, it would take 4.4 days to fully cover the short volume. What’s more, GME has closed lower five times following the day after earnings for its past eight earnings reports. Over the past five quarters, GameStop has also exceeded revenue estimates four times.
Per Barron’s, GameStop has not reported a profitable quarter since the end of January 2021. Based on analyst estimates, its likely the company will not have been profitable during Q2 either. In the case of a positive EPS reading, though, GME stock should soar higher.
Options traders appear to be bullish as well. In the past ten days, 2.5 call options for GME have been bought for every put option purchased on three options exchanges.
Under the leadership of CEO Matt Furlong, GameStop has placed an emphasis on fulfillment capabilities, customer service and, interestingly, non-fungible tokens (NFTs). The video game retailer launched an NFT marketplace and wallet this summer. Earnings should provide a glimpse into this development.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.