Maybe GameStop (GME) Should Stop Reporting Earnings Altogether

If there were a high scorer list in terms of stock performance since the start of 2020, the letters “GME” would be near the top. One hundred dollars worth of GameStop (GME) at the start of 2020 would currently be worth $2,925!

Today, though, shares of GME have been trading down over 7% following a disappointing earnings report after the close yesterday. Given the performance of GME since the start of 2020, you would think that a day like today where the stock trades sharply lower in reaction to earnings would be an outlier. Hardly. Following its six prior earnings reports since the start of 2020 leading up to today, GME has traded lower on its earnings reaction day five times for an average decline of over 16%. The only positive reaction the stock has had in reaction to earnings during this period was a 2.2% gain in June 2020. In fact, going all the way back to September 2018, that June 2020 gain was the only positive earnings reaction day for the stock. How bad have earnings reports been for GME’s stock since the start of 2020? While $100 in GME stock since the start of 2020 is worth nearly $3,000 today, if you only had exposure to the stock on the day of each of its earnings reaction days since the start of 2020, that $100 would be worth less than $30 today!

The cumulative effect of GME’s weak reaction to earnings also shows up if you look at its cumulative performance since 2020, not including the trading days following its quarterly earnings reports. Not including those seven trading days, $100 worth of GME at the start of 2020 would be worth nearly $10,000 today! Following its earnings conference call after the close yesterday, GME management was criticized for not taking any questions in its conference call and providing little insight into its strategy moving forward. Based on how the stock has historically reacted to earnings, though, management probably wishes they could just do away with the whole earnings process entirely. 

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