GameStop (NYSE: GME) stock price has been in a strong freefall in the past two years as questions about its industry remain. After peaking at $120 during the meme stock frenzy era in 2021, the stock has plummeted to near $10. In this period, its market cap has crashed has dropped from almost $97 billion to $3.4 billion.

GameStop’s share price has crashed hard as investors start to question its future in an era when most people are turning to cloud gaming. In a recent note, an analyst at Wedbush estimated that the company will cease to exist by 2030. 

GameStop is facing huge challenges. Its entry to the Non-Fungible Token (NFT) industry did not work out as demand faltered. At the same time, most people are no longer buying physical video games as they focus on online versions.

Most notably, the console market is facing a major slowdown. A report published this week showed that gaming computers and consoles revenue growth will remain below the pre-pandemic level through 2026. This is important because GameStop is a big seller of these devices.

The most recent financial results showed that GameStop’s business continued weakening in the fourth quarter. Revenue slipped to $2.22 billion, bringing the annual figure to $5.92 billion. It had made over $6.01 billion a year earlier. 

On the positive side, the company moved from a negative cash flow of $110 million in 2022 to a positive $337 million. That happened as it reduced costs and inventories. 

Analysts believe that GameStop’s business will not see any improvements in the coming years. The two analysts tracking the company have an average revenue estimate of $4.79 billion and $4.57 billion in 2024 and 2025.

Therefore, there is a likelihood that the GME stock price will continue falling in the next few years unless a miracle happens. Indeed, GameStop is mostly in business because of the meme stock craze miracle that happened in 2021. 

Technically, as shown below, GameStop’s shares have formed a falling wedge pattern, which is one of the most popular reversal signs.

GME chart by TradingView

GameStop and AMC Entertainment have all crashed hard in the past few years. AMC’s stock crashed as the company increased its dilution as it raised billions of dollars. In 2023, the company raised over $848 million by selling shares. 

The reality, however, is that GameStop is healthier than AMC by far. AMC has implemented these dilutions because of its mountain of debt, which stands at over $9 billion. It added some of this debt during the Covid-19 pandemic. It faces substantial dilutions in the coming years.

GameStop, on the other hand, has one of the best balance sheets in retail. It has no debt and has over $1.39 billion in cash, equivalents, and marketable securities. That was a big increase compared to $1.27 billion that it had a year earlier.

The strong balance sheet means that GME has not diluted its shareholders since 2021 when it took advantage of the soaring stock price to sell shares. It increased its share count from 261 million to 303 million. 

Therefore, the healthier balance sheet means that the company made money from the high-interest rates environment. Its net interest income jumped to almost $50 million in 2023. 

Still, the biggest concern for GME stock is that it has major factors outside its control in that the gaming industry is not doing well.

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