The GameStop (NYSE: GME) stock price has staged a strong comeback as I wrote in my last prediction. It has soared from April’s low of $9.76 to almost $20, making it one of the best-performing companies in the US. 

GameStop’s stock price has surged even as the company continues to face substantial headwinds that could affect its long-term viability. The ongoing momentum reminds most investors of what happened in 2021 as it surged from less than $10 per share to $120.

GameStop’s business is going through major challenges as evidenced by its recent financial results. Revenues in Q4 dropped to $1.79 billion, down from $2.2 billion in the same period in 2022 and the trend will likely continue. 

On an annual basis, GameStop’s revenue came in at $5.2 billion, a sharp reversal from a peak of $6.4 billion in 2020. Analysts expect that revenues for 2024 will be $4.9 billion followed by $4.7 billion in 2025.

GameStop’s key challenge is that the gaming industry is changing. People are no longer buying gaming DVDs but are instead downloading soft-copy games. Companies like Epic Games, EA Sports, and Microsoft have changed how the industry works.

At the same time, most people prefer buying gaming consoles online directly from the manufacturer or third-party sellers. This leaves GameStop at a challenging situation and its outlook is continuing to worsen. 

GameStop’s attempts to diversify its income have largely failed. A good example of this is its entry into the Non-Fungible Token (NFT) industry. While NFT sales boomed briefly, they then faded, pushing the company to exit the industry altogether.

Fortunately, for GameStop, it still has one of the best balance sheets in the industry. It has little debt of just $17 million and capital leases of $386 million against cash and short-term investments of almost $1.2 billion. The company made almost $50 million in interest income in 2023, which helped it to turn a small profit of $6.5 million.

GME chart by TradingView

I have been a bit bullish on GME recently from a technical perspective. In this article, I explained why the company was significantly different from AMC, a well-known cash incinerator. 

A look at the weekly chart shows why the GameStop stock price has soared. It has been forming a falling wedge pattern, which is one of the best-known reversal signs. This wedge pattern has now moved to its confluence level.

Therefore, while analysts are cautious on the GME stock, I believe that the return of retail traders could push it higher. If this happens, it could jump to about $43, which is about 144% higher than where it is today. 

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