Assessing GameStop's Quiet Turnaround: Is the GME Bull Case Building Momentum?

The story of GameStop (GME) has long been one of extremes-first as a retail giant, then a meme stock, and now, perhaps, a value-driven turnaround in the making. As of Q3 2025, the company's financial and strategic trajectory reveals a complex narrative: declining traditional sales, a pivot to high-margin collectibles, and a stock price caught between bearish technical signals and pockets of optimism. For investors, the question remains: Is the bull case for GME gaining traction, or is the market's skepticism justified?

Financial Performance: A Tale of Two Sides

GameStop's Q3 2025 earnings report underscored the duality of its transformation. While net sales fell to $821 million-a 4.6% decline year-over-year-net income surged to $77.1 million, a 346% increase from $17.4 million in Q3 2024. This divergence was driven by aggressive cost-cutting, with SG&A expenses dropping to $188.7 million (from $222.1 million in the prior year) and operating income turning positive at $41.3 million. The company's liquidity also improved, with cash, cash equivalents, and marketable securities rising to $8.8 billion.

However, the revenue shortfall-missing estimates of $987.3 million-spooked investors, sending shares down over 5% in after-hours trading. The culprit? A continued slump in hardware, accessories, and software sales, which now account for less than 30% of total revenue according to market analysis. This decline reflects the broader shift in gaming toward digital platforms, a trend GameStop has struggled to fully embrace.

Strategic Retail Transformation: High-Margin Collectibles as a Lifeline

The silver lining in GameStop's Q3 report was the explosive growth of its collectibles segment. Trading cards like Pokémon and Magic: The Gathering generated $256.1 million in revenue-a 50% year-over-year increase-and now represent nearly one-third of total sales according to Morningstar. This segment's gross profit margin, while not explicitly disclosed, is inferred to be significantly higher than traditional video game sales, contributing to an overall gross margin of 33.3% for the quarter according to Tipranks.

CEO Ryan Cohen has positioned collectibles as a return to GameStop's "heritage and trade-in model," offering a tactile, high-margin product that resonates with its core customer base. This pivot is part of a broader strategy to diversify revenue streams, including the closure of underperforming stores reducing the U.S. footprint to under 3,000 locations and the divestiture of international operations according to Seeking Alpha. Additionally, GameStop's $515.7 million Bitcoin investment underscores its treasury strategy to optimize liquidity and returns according to Seeking Alpha.

Technical Analysis: A Mixed Bag of Signals

From a technical standpoint, GME's stock remains a battleground between bullish and bearish forces. The 50-day moving average falling below the 200-day line-a "death cross"-signals a bearish trend. Analysts have set a 2025 price target of $13.50, implying no growth from current levels. Meanwhile, the RSI (66.2) suggests neutral conditions, and the MACD crossing above the signal line hints at short-term bullish momentum according to Investing.com.

The Q3 earnings report exacerbated this duality. While the EPS beat of $0.24 (versus $0.20 expected) provided some upward pressure, the revenue miss triggered a sharp selloff, with the stock dropping to $21.66 in after-hours trading. Key support and resistance levels at $19.94 and $27.69, respectively, will likely dictate near-term volatility according to Investing.com.

Is the Bull Case Building Momentum?

For the GME bull case to gain traction, GameStop must demonstrate that its collectibles-driven transformation can offset declining traditional sales and sustain profitability. The collectibles segment's 50% YoY growth and high-margin profile are encouraging, but they must translate into consistent revenue growth. The company's Q3 results showed that net income can rise even with falling sales, but this is not a sustainable model in the long term.

On the technical front, the stock's mixed signals suggest caution. While the MACD and moving averages offer some optimism, the broader trend remains bearish. A break above $27.69 resistance could reignite investor confidence, but a drop below $19.94 support would likely deepen the bear case.

Conclusion: A Work in Progress

GameStop's turnaround is far from complete, but it is undeniably in motion. The collectibles segment has emerged as a viable growth engine, and cost-cutting measures have improved profitability. However, the company's reliance on a single high-margin product line and the broader bearish technical backdrop pose significant risks. For now, the bull case for GME hinges on whether the collectibles boom can evolve into a diversified, scalable business model-and whether the market will reward that transformation with a re-rating of the stock.

Until then, investors must weigh the promise of a value-driven retail revolution against the reality of a stock that remains a magnet for volatility.