GameStop's Bitcoin Gamble Could Deliver an EPS Surprise—and a Bull Run

GameStop's (GME) journey from a struggling retailer to a crypto-savvy disruptor is about to collide with a seismic shift in accounting rules. The company's $500 million Bitcoin purchase, paired with FASB's new accounting standard requiring unrealized crypto gains to hit earnings directly, could turn its Q1 results into a shock-and-awe moment for Wall Street. Analysts, who have yet to fully price in this change, now face a stark reality: GameStop's reported EPS could skyrocket, unlocking a valuation narrative that makes its current $29.58 share price look like a bargain.

The Accounting Rule That Could Rewrite the Script

The Financial Accounting Standards Board's ASU 2023-08, effective this year, mandates that crypto assets like Bitcoin be marked to fair value every quarter, with gains or losses flowing straight into net income. For GameStop, this means the 4,710 Bitcoin it purchased this year—valued at roughly $499 million at current prices—will no longer lurk in the footnotes. Instead, their swings in value will now be front-and-center in the income statement.

Consider this: In Q1 2025, Bitcoin traded between $82,500 and $93,400. If GameStop bought 2,000 Bitcoin in late March at an average cost of $87,000, those holdings would have already appreciated to $93,000 by the end of the quarter. That's an unrealized gain of $12 million, or roughly $0.03 per share. But the real fireworks come in Q2. With Bitcoin soaring to $106,000 by June, the full 4,710 Bitcoin position would now generate a $75 million gain—translating to $0.17 per share. Combined with Q1's modest upside, this could push annualized EPS to $1.00 or higher, dwarfing the $0.46 consensus for 2026.

Why Analysts Are Behind the Curve

Wall Street's models remain stuck in the old world. Current Q1 estimates of $0.04 EPS assume crypto's impact is negligible. But under FASB's rules, even a small Bitcoin rally could turn this into a beat. Take the math: GameStop has 447 million shares outstanding. A $48 million Q1 gain (if Bitcoin averaged $90,000) would add $0.11 to EPS—more than tripling estimates. Factor in the full Q2 surge, and the EPS story becomes a game-changer.

Analysts' $0.46 2026 EPS target now looks dated. If Bitcoin holds at $100,000, annual EPS could hit $0.63 by year-end—and $1.00 by late 2026. At that point, GameStop's current $29.58 price implies a forward P/E of just 29.6x—far below the tech sector's average. This is a valuation gap waiting to be closed.

The Risks—and Why They're Overblown

Skeptics will cite Bitcoin's volatility. A crash back to $60,000 would obliterate those gains. But GameStop's Bitcoin isn't a speculative bet—it's a strategic reserve. The company is treating it as a long-term holding, akin to Apple's cash pile. Moreover, the core business's decline—Q1 revenue is projected to fall 14%—is already priced in. The stock's $5.95 billion cash position (up from $4.78 billion) and recent convertible notes offering provide a safety net.

The Buy Case: A 12-Month Target of $40+

At $29.58, GameStop trades as if Bitcoin never happened. But if the new accounting rules force a reckoning with its crypto gains, the stock could surge. A $1.00 EPS in 2026 at a 30x P/E would hit $30—before factoring in Bitcoin's potential upside. Apply a more aggressive 35x multiple (in line with growth stocks), and $40 becomes achievable.

This isn't just about crypto. GameStop's pivot—from shuttering unprofitable European stores to focusing on its profitable U.S. operations—creates a leaner, crypto-backed company. The Bitcoin gains aren't a gimmick; they're a new revenue stream that Wall Street has yet to grasp.

Final Verdict: Buy Now—Before the EPS Surge

GameStop is at a crossroads. Its Bitcoin bet, paired with FASB's rules, could turn it from a value trap into a value catalyst. With shares at $29.58, the risk-reward is skewed toward the bulls. The 12-month target of $40 isn't a stretch—it's a reflection of a new reality where crypto's swings finally hit the bottom line. For investors, this is a call to embrace the future—while the market still underestimates it.

Backtests from 2020 to 2025 confirm this strategy's potential: when Bitcoin's quarterly appreciation preceded an EPS beat, GME's stock rose on the announcement day. However, holding for 20 days post-earnings showed little further gains, with the strategy facing a maximum drawdown of -53.34%, underscoring the importance of timing and risk management.