GameStop squeezing ahead of earnings

GameStop (GME) stock is rallying ahead of its fiscal fourth-quarter earnings release, with shares up 7.8% to $14.12 on Monday morning. This marked the stock's largest percentage increase since December 13, 2021. The so-called meme stock is still down 84% from its all-time high of $86.88, recorded on January 27, 2021. 

The significant rally seen at that time was driven by retail investors coming together to buy shares, leading to a squeeze on short sellers. Much of the discussion surrounding this movement took place on the WallStreetBets Reddit forum. 

On Monday, more Reddit users expressed enthusiasm for the stock's gains, with one user stating, looks like GameStop is back on the menu boys. 

GameStop is scheduled to release its financial results for the quarter ended February 3, 2023, after the market closes on Tuesday. Considering the stock's volatile history, it is challenging to predict how its performance will reflect the company's underlying business. 

Wall Street anticipates earnings per share of 29 cents and revenue of $2.05 billion for the quarter. Investors are hoping for positive earnings results, given that the company's previous report, for Q4 2022, showed EPS of 16 cents and revenue of $2.23 billion. The release of the earnings report on Tuesday is set to be a significant catalyst for the video game and pop culture merchandise retailer. 

GameStop is aiming to diversify its production as its video gaming business has become outdated. As a global video game retailer, its performance and operating margins will be crucial to monitor in the upcoming report, as they may impact the stock price.

Short Interest remains very high as 22% of the float remains short. This is nearly $1 billion bet against GME. The stock has staunch resistance at the $15 level but that might entice short squeezers as it suggests a number of stops could be in this neighborhood. The potential for a short squeeze is further exasperated by the light participation which is usual for a holiday-shortened week. GME shares are trading nearly 3x daily volume today, highlighting the focus from the retail crowd. 

GameStop was at the center of the Reddit Rebellion in 2021, when a group of retail investors, supported by the Reddit community WallStreetBets and Elon Musk, caused the stock's price to skyrocket by 1,000% in just two weeks. This dramatic rise in GameStop's share price also influenced other meme stocks, such as AMC Entertainment Holdings, BlackBerry Limited, and Bed Bath & Beyond. 

GameStop's upcoming earnings report is a significant catalyst for the company, as it aims to demonstrate growth and profitability in the face of changing market conditions. While the stock's performance remains highly volatile, investors will be closely monitoring the earnings results and the company's efforts to diversify its business. As the events surrounding GameStop in 2021 highlighted the growing influence of retail investors and social media on the stock market, this report will be closely watched by market participants worldwide.