Why GameStop's Upcoming Earnings Could Trigger a New Short Squeeze

GameStop (GME) stands at a critical juncture ahead of its June 10, 2025 earnings report, where its ability to navigate declining retail sales, volatile Bitcoin investments, and a highly leveraged balance sheet will be put to the test. While the company's fundamentals remain challenged, the confluence of extreme short interest, a valuable but overhyped Bitcoin portfolio, and historical volatility around earnings reports creates a setup ripe for a short squeeze. Below, we dissect the catalysts and risks to determine whether this could be the catalyst for a near-term rebound—or another cautionary tale of overexuberance.

The Bearish Backdrop: Why Shorts Are Betting Against GME

GameStop's struggles are well-documented. Over the past year, net sales have fallen by 28.5% year-over-year, with the company's core gaming hardware business hemorrhaging customers to digital platforms and online competitors. Even its pivot to collectibles—now accounting for 21% of revenue—has not offset the decline, as the market for Pokémon cards and trading cards fluctuates unpredictably.

The company's financials are further strained by its $512 million Bitcoin investment (4,700 BTC), purchased near all-time highs, and a 30% increase in shares outstanding over the past year to fund operations. These moves have left GameStop with a market cap of $13 billion against $3.8 billion in annual revenue, a valuation that strains credulity. The trailing P/E ratio of 2,463x underscores the disconnect between its stock price and earnings power. Analysts, unsurprisingly, are skeptical: the lone “Moderate Sell” rating reflects a consensus that the company's growth initiatives are underwhelming and its Bitcoin bet a gamble.

The Short Squeeze Catalyst: Why Bulls Could Win This Round

Despite these headwinds, three factors position GameStop's upcoming earnings as a potential catalyst for a short squeeze:

1. Extreme Short Interest

With 64.37 million shares sold short (as of April 2024)—representing a short interest ratio of 11.0—GameStop ranks among the most heavily shorted stocks in the market. This level of bearish positioning creates a precarious situation: if the company meets or exceeds the modest consensus EPS forecast of $0.08 (vs. -$0.12 in the same quarter last year), short sellers could be forced to cover positions, sparking a rally. Even a small beat on EPS, combined with positive guidance, could trigger a self-fulfilling upward spiral.

2. Historical Volatility Around Earnings

GameStop's stock has shown a pattern of sharp swings following earnings reports. For example:
- After its June 7, 2024 earnings, shares plunged 39% due to revenue misses but rebounded 11.65% after subsequent reports.
- In March 2025, a modest beat on EPS drove a +11.65% jump the following day.

This volatility reflects the market's binary view of the company: it either delivers a “win” that rallies sentiment or a disappointment that amplifies skepticism. The upcoming report could again be a flashpoint for this dynamic.

3. Strategic Pivot and Bitcoin's Role

While the collectibles segment is inconsistent, GameStop's Bitcoin holdings remain a wildcard. With shares now trading below the cost basis of its BTC purchases, the company has an incentive to highlight the asset's value or pivot its strategy. A sudden Bitcoin price surge—or even a rumor of it—could provide a narrative boost, especially if paired with positive earnings news.

Risks and the Bigger Picture

The setup is not without pitfalls. Key risks include:
- Revenue Misses: Analysts project Q2 revenue of $754 million, down from $882 million in 2024. A deeper-than-expected decline could reignite bearish sentiment.
- Bitcoin Volatility: If Bitcoin's price plummets further, GameStop's balance sheet could face additional strain.
- Structural Challenges: The gaming industry's shift online and the collectibles market's unpredictability suggest long-term growth remains elusive.

Moreover, the stock's 2,463x P/E ratio is unsustainable unless earnings surge dramatically—a leap that would require not just meeting current forecasts but fundamentally transforming its business model.

Investment Strategy: A High-Risk, High-Reward Opportunity

For investors willing to take on the risk, GameStop's earnings present a speculative opportunity to position for a short squeeze ahead of the June 10 report. Here's how to approach it:
1. Look for Technical Breakouts: Monitor GME's price action in the weeks before earnings. A sustained move above $15–$20 could signal early accumulation.
2. Focus on EPS Guidance: Even if revenue disappoints, a positive EPS print and forward guidance could spark a rally.
3. Set Strict Stop-Losses: Given the stock's volatility, protect against downside by capping losses at 20–30%.
4. Avoid Long-Term Bets: GameStop's fundamentals remain fragile; this is a tactical trade, not a buy-and-hold play.

Conclusion

GameStop's upcoming earnings are a high-stakes event for both bulls and bears. While the company's long-term prospects are clouded by structural challenges, the extreme short interest, volatile earnings history, and Bitcoin's speculative allure create a setup where a short squeeze is plausible—if not probable—in the near term. Investors should treat this as a tactical opportunity to profit from market psychology, not a bet on lasting value. As always, caveat emptor: GameStop's story is as much about crowd behavior as it is about fundamentals.