Before diving into a GameStop Bitcoin investment, it’s crucial to assess the company’s financial health. GameStop (NYSE:GME) has faced years of declining revenue, with sales dropping from $9.29 billion in fiscal 2015 to $4.3 billion in the last 12 months. The company’s operating margins have also been shrinking, moving from 6.8% in 2015 to -0.6% in 2024.
Despite these struggles, GameStop turned a profit in Q3 2024, posting a net income of $17.4 million, compared to a $3.1 million loss in the same quarter last year. This turnaround was fueled by cost-cutting measures, including reducing selling, general, and administrative (SG&A) expenses and exiting unprofitable international markets.
Currently, GameStop’s revenue is primarily derived from:
Hardware and accessories (48.5%)
Software (31.6%)
Collectibles (19.9%)
The company’s strong liquidity position, bolstered by a $400 million at-the-market stock offering, provides the flexibility to explore GameStop Bitcoin investment as a new avenue for growth.
Could Bitcoin Change GameStop’s Stock Trajectory?
If GameStop follows MicroStrategy’s lead in accumulating Bitcoin, its stock could become highly correlated with cryptocurrency price movements. MicroStrategy’s stock skyrocketed over 1,900% between June 2022 and February 2024 as Bitcoin prices recovered. The company is currently valued at approximately twice the value of its Bitcoin holdings, setting a precedent for GameStop’s potential valuation.
If GameStop were to allocate $5 billion into Bitcoin, its market cap could theoretically double, reaching $10 billion. However, this approach comes with risks, as evidenced by MicroStrategy’s 80% stock decline during Bitcoin’s bear market in 2022.
Wall Street remains skeptical about GameStop’s fundamentals. The only analyst covering the stock currently has a “Strong Sell” rating with a $10 price target, suggesting a potential 60% decline from current levels. If a GameStop Bitcoin investment materializes, it could bring extreme volatility to the stock.
Final Thoughts: Should You Buy GameStop Stock?
GameStop’s potential foray into Bitcoin could be a game-changer, but it also introduces significant risk. Unlike MicroStrategy, GameStop’s core business—video game retail—remains under pressure from digital downloads and shifting consumer habits.
For investors bullish on Bitcoin, there are more direct ways to gain exposure, such as buying BTC itself or investing in Bitcoin-heavy firms like MicroStrategy. However, if GameStop Bitcoin investment materializes, it could attract speculative interest, driving short-term stock gains.
Ultimately, whether GameStop stock is a buy, sell, or hold depends on your risk tolerance and belief in its ability to execute this new strategy.
Potential Long-Term Impact on GameStop
Beyond the immediate price impact on GameStop stock, the company’s entry into Bitcoin could redefine its business model. If successfully integrated, Bitcoin holdings could serve as a hedge against inflation and provide alternative revenue streams through potential lending or collateralization strategies. This could differentiate GameStop from traditional retailers and transform it into a hybrid investment and gaming company.
However, the volatility of Bitcoin remains a double-edged sword. If prices plummet, GameStop could see significant paper losses, which may overshadow any operational improvements. Investors should also consider regulatory risks, as increased government scrutiny on corporate Bitcoin holdings could impact GameStop’s ability to execute this strategy effectively.
As GameStop’s leadership evaluates this pivot, it will need to balance its core gaming business with the potential rewards and risks of Bitcoin. Whether this move ultimately benefits the company’s shareholders will depend on execution, timing, and broader market conditions. The next few quarters will be crucial in determining if GameStop can successfully navigate this bold new direction. Even with Bitcoin’s potential to boost GameStop’s market cap, careful attention to the risks is essential. The market’s reaction to this strategy may shape GameStop’s future trajectory, so remaining cautious is key.
Featured Image: Freepik
Author Stephanie Bédard-Châteauneuf 
