GameStop Stock Erases Recent Gains on Earnings Flop

GameStop reported a loss and revenue that were worse than analysts' estimates

The shares of retailer GameStop Corp. (NYSE:GME) are looking to snap their five-day win streak that lead up to their second-quarter earnings, after reporting a per-share loss of $0.32 -- wider than the $0.21 loss predicted by analysts -- and worse-than-expected revenue. The firm also lowered its 2019 outlook. In response, the equity is eyeing its biggest percentage drop in nearly three months, down 16% at $4.27.

Looking back, GME stock was able to find its footing back atop its 10-day moving average following an all-time low of $3.15 touched on Aug. 15 -- helped along by its website unveiling later in the month. And while the security finished right atop its 80-day moving average for the first time in seven months yesterday, it was ultimately rejected by this trendline, as evidenced by today's plummet.

Benchmark, Wedbush, and Jefferies have already chimed in with price-target cuts, with Benchmark slashing its estimate to $3. Now, the consensus 12-month price target of $5.32 is at a roughly 25% premium to current levels. GME could be susceptible to downgrades, too, with one of the five in coverage still calling it a "strong buy," and two saying "hold."

Considering its roughly 60% year-to-date deficit, sentiment in the options pits has been surprisingly optimistic. On the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) 2.35 calls have been bought for every put during the last 10 days. This ratio sits higher than 86% of all other readings from the past year, indicating that this tendency towards bullish bets is unusual.