PreMarket Prep Stock Of The Day: GameStop

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

After a major rally off its March low, GameStop Corp GME is giving some back following the latest earnings report. Its corresponding price action makes it the PreMarket Prep Stock Of The Day.

Finally Found A Bottom: After a six-year decline off its all-time high made in October 2013, GameStop finally found a bottom in April at $2.57.

The rally along with the broad market was aided by activists taking stakes in the issue and a collaboration with Microsoft MSFT. That deal announced in mid-October will allow the gaming retailer to grow its physical and digital video game offerings and build up its retail infrastructure.

The rally came to an abrupt halt when it peaked on Nov. 30 and backed off to end the session at $16.56. That marked the highest level for the issue since it peaked at $20.31 in January 2018.

Consolidation Ahead Of Earnings: On many occasions, an issue will go through a consolidation period after a big move, especially if it coincides with an upcoming earnings report. Over the last six sessions, the issue has been in a trading range from $15.38 to $17.50. It should be noted that the issue posted its highest close for the rebound on Tuesday at $16.94.

Q3 Earnings And Offering: After the close on Tuesday, the company announced third-quarter adjusted EPS $(0.53), which beat the $(0.85) estimate, and sales of $1 billion which missed the $1.09 billion estimate. The company said e-commerce sales increased 257% and comparable store sales declined 24%.

A filing showed the company has registered for a mixed securities shelf offering with no size or price being revealed.

Price Action During The Show: When the issue was being discussed on the show, it was trading at the $14 area and Dennis Dick had no interest in trying to pick a bottom. He wasn't planning to wait until the size and price of the offering before trading the issue.

The author of this article noted the propensity for the issue to retreat after a big rally and then consolidate in a defined area before attempting another rally, identifying the $14 area as an area of possibility consolidation over the next few weeks

Price Action During The Regular Session: After a lower open, it continued in that direction until it found support at $13.23 and reversed course. The ensuing rally found resistance well ahead of the bottom of Tuesday’s range ($16.93) and began to drift lower. As of 2 p.m. ET, it traded in a tight range just above and below the $14 level.

The full discussion on the issue from today’s show can be found here: