GameStop forecasts 72% profit jump to $310M on eBay gains

GameStop expects second-quarter net income of $290 million to $310 million, up from $168.6 million a year earlier, driven by gains on its eBay investment.

The videogame retailer said the forecast includes about $238 million of net gains tied to its eBay derivative asset and equity investment, partially offset by a roughly $75 million loss on digital assets, according to its preliminary results statement Monday.

Net sales are projected at $780 million to $800 million, down from $972.2 million last year but above the $756.85 million consensus. The decline reflects the prior-year launch of Nintendo's Switch 2, planned store closures and the divestiture of French operations. Operating income is expected to more than double to $150 million to $170 million from $66.4 million.

The profit surge is heavily dependent on non-operating investment gains rather than core retail performance. GameStop converted its eBay derivative into direct equity during the quarter, holding about 43.4 million shares valued at roughly $4.947 billion as of Aug. 1, while cash fell to $5.05 billion to $5.07 billion from $8.694 billion.

Separately, GameStop amended its exchange of about $1.4 billion in zero-coupon convertible notes due 2030 and 2032. Noteholders will receive about 55.5 million shares, or 73 percent of consideration, plus $358.4 million in cash, replacing the original all-stock settlement. The change fixes the share count and removes variable dilution tied to the stock's volume-weighted average price over a 35-trading-day reference period. About $2.8 billion of the notes will remain outstanding after the exchange closes around Sept. 3.

Chief Executive Ryan Cohen earlier this year made an unsolicited offer to buy eBay for about $56 billion, which the e-commerce company rejected as "neither credible nor attractive." GameStop has amassed a 7.78 percent stake in eBay, according to a May filing with the Securities and Exchange Commission.

The guidance signals management expects investment gains to keep supporting the bottom line even as core sales shrink. Investors will watch the full second-quarter report on Sept. 8 for updated retail margins and any further moves on the eBay stake.

This article is for informational purposes only and does not constitute investment advice.