Retailer GameStop (GME) is once again gaining attention with its rising stock price and a series of bold moves. After being known for its meme-stock status in recent years, the company now appears to be shifting toward a more serious business turnaround. But as with any stock, there are both promising growth drivers and real risks to watch.
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Catalysts That May Push the Stock Higher
One of the biggest reasons GameStop stock has been rising is its stronger financial performance. Indeed, in the second quarter of 2025, the company reported about $972.2 million in revenue, which was a 22% jump from last year. Most of this growth came from hardware like gaming consoles (up 31%) and collectibles, such as action figures and trading cards (up 63%). These areas are important because they don’t rely as much on digital game downloads, which have been hurting the rest of GameStop’s business.
More impressively, GameStop made a profit of around $166.5 million, compared to just $14.8 million last year. The company is also finding ways to reward shareholders. In fact, GameStop announced a special dividend where investors will get one warrant for every ten GME shares they own. These warrants let shareholders buy more GME stock later at $32, and if all are used, the company could raise up to $1.9 billion. It’s also worth noting that GameStop has reduced its operating costs by nearly 20%, which has made the business more efficient and allowed it to improve profitability.
Separately, strong demand for gaming products could also support the stock. The release of the Nintendo (NTDOY) Switch 2 has helped boost console sales, and demand for PlayStation 5 and Xbox systems remains strong. GameStop is also benefiting from exclusive releases, such as “Borderlands 4,” which is being sold only in its stores. At the same time, pop culture collectibles are still popular. All of this has improved investor confidence and has been supporting the recent rally in GME’s share price.
Risks to Watch Out For
Nevertheless, there are some risks that could drag GME stock lower. One red flag is that software sales—meaning the actual video games—dropped 27% in the latest quarter. That’s concerning because game content is usually where the most consistent, long-term money is made in this industry. If the current growth in hardware and collectibles slows down, GameStop could have a hard time keeping its momentum going.
Another risk is the company’s exposure to cryptocurrency. GameStop’s large $528.6 million Bitcoin holdings might pay off when crypto prices go up, but it also creates a lot of uncertainty. If Bitcoin drops or if there are new regulations, it could hurt the company’s value. There’s also a concern with the special warrants. Indeed, although they give shareholders the right to buy more stock at $32, they could lead to dilution, which means that more shares will be created. This could lower the value of individual shares if the market doesn’t keep up.
Finally, GameStop’s valuation is already quite high, as it is trading at around 34 times earnings. This is higher than many similar retail companies. The company also faces strong competition from big online stores and digital game platforms, which could cause GameStop’s market share to shrink. And since the stock has been driven by both real improvements and hype in the past, it’s possible that excitement could cool off quickly if expectations aren’t met.
Is GME Stock a Good Buy?
Turning to Wall Street, analysts have a Moderate Sell consensus rating on GME stock based on one Hold and one Sell assigned in the past three months, as indicated by the graphic below. Furthermore, the average GME price target of $19.75 per share implies 24% upside potential.
