During the lightning round of the September 17 episode of Mad Money, a caller inquired about GameStop Corp. (NYSE:GME), highlighting its multi-billion-dollar market capitalization, strong cash reserves, record second-quarter performance, and insider share purchases. Jim Cramer replied:
I think it actually works for me. It’s a profitable company, and they’re trying to turn around, and I think they’re having some success. I’m willing to say that that stock is a buy.
Collectibles Expansion And Record Second Quarter Operating Income
GameStop Corp. experienced operational improvement in its second-quarter financial results, delivering its highest second-quarter operating income of $160.2 million, representing over a 140% increase compared to $66.4 million in the prior-year period. Net income climbed to $298.7 million, up 77% year-over-year, supported by aggressive cost management and a major shift in product mix. The core growth driver was the collectibles division, which expanded 57% year-over-year to $356.3million, accounting for 45.1% of total net sales. The surge helped offset broader retail headwinds and increased gross margins. Furthermore, GameStop maintains a strong balance sheet with $5.4 billion in liquid assets, including $5.1 billion in cash, cash equivalents, and marketable securities, giving management significant financial flexibility.
Core Retail Contraction And Reliance On Non-Operating Gains
GameStop Corp. continues to face structural headwinds in its physical retail footprint. Total net sales fell 18.7% year-over-year to $790.2 million, highlighting planned store closures, the divestiture of international operations, and declining demand for physical hardware and software. Video game sales plunged to $263.2 million from $494.6 million a year prior. Additionally, a substantial portion of net income stemmed from non-operating factors, including gains from a 43.4 million share stake in eBay, which offset $75 million in digital asset write-downs.
Hedge Fund Portfolio Holdings and Short Seller Exposure
According to Insider Monkey database tracking over 1,000 hedge funds, institutional ownership in GameStop Corp. experienced a slight reduction during the second quarter. A total of 26 hedge funds held positions in the company at the end of the second quarter, down from 29 funds in the preceding quarter. Of those funds, Marshall Wace LLP was the biggest shareholder with 2.9 million shares. The short interest accounts for 13.91% of the float, highlighting that a notable segment of the market continues to position for potential price corrections or near-term volatility.
Overall, a combination of positive net income, an expanding collectibles footprint, and a massive cash cushion serves as a compelling case for turnaround investors. Generating positive operational performance provides management with the necessary runway to reposition the enterprise, making GameStop Corp. appealing following recent market pullbacks.
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