According to a CNBC report, GameStop (GME) is exploring potential investments in cryptocurrency, particularly Bitcoin (BTCUSD), as part of its strategy to diversify into alternative assets. The news, which caused GameStop’s shares to surge 8.5% in pre-market trading on Feb. 14, comes after CEO Ryan Cohen was spotted with MicroStrategy (MSTR) chairman Michael Saylor. However, sources have indicated that Saylor is not involved in GameStop’s crypto discussions.
The video game retailer has previous experience in the crypto space, having launched and subsequently shut down crypto wallets in 2022-2023 due to regulatory concerns. Under Cohen’s leadership since 2021, GameStop has prioritized cost-cutting and operational efficiency, accumulating a $4.6 billion cash reserve as of November 2024.
A new investment policy approved in December 2023 gives Cohen and select board members authority to manage the company’s investment portfolio. If GameStop proceeds with Bitcoin investments, it will follow MicroStrategy, which has transformed from a software company into a significant, Bitcoin-holding entity.
Is GME a Good Stock to Own in 2025?
Over the past decade, GameStop has struggled with slowing revenue growth and negative profit margins. Its sales have declined from $9.29 billion in fiscal 2015 (which ended in January) to $4.3 billion in the last 12 months. Meanwhile, its operating margins have narrowed from 6.8% in 2015 to -0.6% in 2024.
In the third quarter, GameStop reported mixed financial results. Net sales declined to $860.3 million from $1.078 billion in the same period last year. However, the company managed to turn a profit, posting a net income of $17.4 million compared to a net loss of $3.1 million in the previous year’s quarter. This improvement came despite lower revenues, thanks to reduced operating costs and higher interest income.
GameStop’s sales mix shows hardware and accessories accounting for 48.5% of revenue, followed by software at 31.6% and collectibles at 19.9%. As seen above, it maintained a strong liquidity position with $4.6 billion in cash and marketable securities, boosted by a successful at-the-market equity offering that raised approximately $400 million.
Notable developments include plans to streamline operations by divesting its presence in Italy and winding down operations in Germany. GameStop also reduced its selling, general, and administrative expenses to $282 million from $296.5 million year-over-year, reflecting ongoing cost management efforts. Its shift toward a more efficient operation is evident in its improved margins, though overall sales continue to face pressure from changing consumer habits in the gaming industry.
What to Expect from GameStop Stock if It Buys Bitcoin?
If GameStop mimics MicroStrategy’s Bitcoin policy, its share price will be closely tied to the performance of the digital asset. For instance, MSTR stock fell over 80% during the Bitcoin bear market of 2022. As BTC prices have since recovered, the tech stock has gained over 1,900% since June 2022. Today, MSTR stock is valued at roughly two times its BTC holdings. So, if GME buys $5 billion worth of Bitcoin, its market cap could be $10 billion.
It will be interesting to see how Wall Street reacts to GameStop’s crypto strategy. Today, a single analyst covering GME stock has a “Strong Sell” recommendation, with an average target price of $10, indicating a drawdown of over 60% from current levels.
