Is GameStop a Smart Bet After Recent 24% Drop in 2025?

Trying to figure out what to do with GameStop stock? You’re definitely not alone. GameStop keeps making headlines, and even seasoned investors are wondering if this is an opportunity or a trap. Over the last year, shares climbed 14.6%, but the journey to that gain was anything but smooth. Returns dropped 11.2% in the last month and they’re down 24.0% year-to-date. For anyone holding on through the past five years, though, GameStop’s story is still jaw-dropping, with an 800.6% total return since 2019. That’s the kind of performance that still draws a crowd, no matter how controversial the stock gets.

What’s fueling these wild moves? Beyond the daily chatter and social media hype, GameStop continues to pull investors in with new business experiments and ongoing speculation about its turnaround strategy. Recent developments such as shifts in leadership, announcements of new product lines, or fresh capital-raising rumors have made the outlook both more exciting and more uncertain. Traders and retail investors are watching for any signal that could spark the next surge or sudden drop, and the mood is both hopeful and tense.

But is GameStop undervalued, overvalued, or just plain unpredictable? According to our six-point valuation framework, GameStop earns a value score of 2, meaning it’s undervalued in only 2 out of the 6 checks we examine. In the sections that follow, I’ll walk you through each of those valuation methods and share what they really reveal about the company. Stick with me until the end. A different, possibly smarter way to look at valuation might surprise you.

GameStop scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: GameStop Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates what a company is worth today by forecasting future cash flows and then discounting them back to their present value. For GameStop, this approach begins with its current Free Cash Flow of $474.5 Million. Analysts generally supply direct forecasts for the next five years, but further projections, reaching out to ten years, are extrapolated to provide a fuller picture of potential growth.

Breaking down GameStop’s outlook, projected Free Cash Flow grows each year, reaching roughly $1.36 Billion by 2035 according to these extended calculations. Early years see stronger expected growth, such as an estimated $610.4 Million in 2026 (up 28.6%), before growth rates naturally slow in the later forecast years. All these cash flows are denominated in US Dollars, which matches the currency GameStop reports in.

After discounting these future cash flows back to today’s value, the DCF analysis estimates GameStop’s fair value per share to be $35.15. This figure is about 33.7% higher than the recent trading price, pointing to a sizable implied undervaluation.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for GameStop.

Our Discounted Cash Flow (DCF) analysis suggests GameStop is undervalued by 33.7%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: GameStop Price vs Earnings

The Price-to-Earnings (PE) ratio is often the go-to metric when valuing profitable companies like GameStop, as it ties the company’s market price directly to its bottom-line earnings. Because this ratio reflects how much investors are willing to pay for each dollar of profit, it is a useful barometer of whether the stock is seen as a growth opportunity or as carrying significant risks.

Growth expectations and risk levels play big roles in determining what is considered a “fair” PE ratio. Higher growth companies or those seen as less risky tend to justify loftier multiples, while stagnating businesses or ones facing uncertainty usually trade at lower ratios. For GameStop, the current PE ratio stands at 28.8x. By comparison, the average for peers is 19.9x, while the broader Specialty Retail industry average is 16.9x. This suggests investors expect more out of GameStop or are willing to accept higher risk.

Simply Wall St’s proprietary “Fair Ratio” refines this comparison further. Instead of just looking at what competitors trade at, the Fair Ratio blends multiple factors including GameStop’s earnings growth, risks, profit margins, market cap, and its industry profile. This provides a more tailored sense of value. By comparing the Fair Ratio to GameStop’s actual PE, we can more accurately judge whether the stock is expensive based on its unique traits.

In this case, the actual PE multiple is significantly above what would be typical for the sector and peers, indicating the stock’s current market price reflects high expectations and risk. With no compelling evidence that the Fair Ratio supports this premium, GameStop’s valuation via earnings multiples appears stretched versus both its own outlook and the broader industry context.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your GameStop Narrative

Earlier we mentioned that there's an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is a clear, straightforward story that expresses your personal perspective on a company's future. Essentially, it's the reasoning that connects your fair value assumptions and estimates for revenue, earnings, and margins to the numbers you see.

Narratives bridge the gap between GameStop’s story, a forward-looking financial forecast, and an actionable fair value, making the investment process both logical and relatable. On Simply Wall St’s Community page, millions of investors share and update their Narratives, making this an easy and accessible tool for seeing the full range of views on any stock.

By comparing the Fair Value set by your Narrative to the current Price, you can decide whether now is the right time to buy, hold, or sell. Since Narratives update dynamically with fresh news or earnings reports, your view stays in sync with reality.

For instance, one investor’s bullish Narrative values GameStop at $120 per share, citing cash reserves, crypto holdings, and strategic leadership. Another investor’s more cautious view sees fair value near $12, given digital disruptions and speculative risks.

For GameStop, we will make it easy for you with previews of two leading GameStop narratives:

🐂 GameStop Bull Case

Fair Value: $120.00

Approx. 80.6% undervalued
(($120.00 - $23.30) / $120.00 = 0.806 or 80.6%)

Revenue Growth Rate: 0%

• GameStop boasts $6.4 billion in cash and zero long-term debt, alongside a strategic holding of 4,710 Bitcoin worth over $500 million. This provides formidable financial flexibility and diversification.
• Under CEO Ryan Cohen, cost-cutting and market exits have led to improved margins and a dramatic profit turnaround, including an adjusted Q1 EPS of $0.17 and $44.8 million net profit versus a prior-year loss.
• A dedicated retail investor base, with 75 million shares direct registered and vibrant online communities, helps reduce short-selling pressure and supports resilience against market swings. This may fuel long-term growth potential.

🐻 GameStop Bear Case

Fair Value: $11.91

Approx. 95.6% overvalued
(($23.30 - $11.91) / $11.91 = 0.956 or 95.6%)

Revenue Growth Rate: 0%

• Despite digital transformation efforts and store closures under CEO Ryan Cohen, GameStop’s revenues are still falling, down 20% in the most recent quarter. The gaming market recovery is lagging and consumer spending is pressured by inflation.
• The Bitcoin and crypto investments introduce additional risk and uncertainty, as success is far from guaranteed and may not materially improve GameStop’s stock value or fundamentals.
• Ongoing meme stock speculation and volatility, driven by retail investor enthusiasm and sudden social media shifts, create a precarious environment for long-term investors. In these conditions, the stock price often detaches from actual company performance.

Do you think there's more to the story for GameStop? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com