GameStop bets big on Bitcoin, stock price soars! Retail investors' faith reignited?

In after-hours trading on Tuesday, video game retailer and "retail concept stock" GameStop (GME.N) saw its stock price surge over 8% after announcing its highly anticipated Bitcoin investment plan. GameStop stated in a brief announcement that its board has unanimously approved an updated investment policy to include Bitcoin as part of the company's financial reserve assets. This move was not entirely unexpected, as there have been numerous rumors in recent weeks regarding GameStop and its CEO Ryan Cohen's Bitcoin strategy. In its 10-K filing, GameStop revealed that the company may invest a portion of its cash, debt, or equity financing proceeds into Bitcoin in the future. "We have not set a limit on our Bitcoin holdings and may sell the Bitcoin we hold," GameStop added. Last month, Cohen posted a photo with Michael Saylor, the executive chairman of software company MicroStrategy (MSTR.O). MicroStrategy has made Bitcoin its primary financial reserve asset since 2020. Now, GameStop has also included Bitcoin on its balance sheet, joining a group of companies betting on the future of the crypto market. These companies hope to benefit from potentially more favorable crypto policies under the Trump administration, including MicroStrategy, online brokerage Robinhood (HOOD.O), and cryptocurrency exchange Coinbase (COIN.O). As early as December 2023, GameStop's board had approved a new investment policy, granting Cohen the authority to manage the company's investment portfolio. On Tuesday evening, GameStop became the most popular stock ticker on Stocktwits. Stocktwits is a social platform for investors, where many are discussing GameStop's new investment strategy and the implications of its Bitcoin positioning. GameStop also released its fourth-quarter earnings report on Tuesday evening. The data showed that for the quarter ending February 1, the company generated revenue of $1.283 billion, a significant decline from $1.794 billion in the same period last year. The average expectation from two analysts surveyed by FactSet was $1.477 billion. Despite the revenue decline, the company's profitability performance was strong. GameStop reported a net profit of $131.3 million with earnings per share of 29 cents, up from $63.1 million (21 cents per share) in the same period last year, marking three consecutive quarters of profitability. Adjusted earnings per share were 30 cents, far exceeding FactSet's expectation of 8 cents (also based on two analysts' forecasts). As of the end of the quarter, GameStop's total cash, cash equivalents, and marketable securities amounted to $4.775 billion, significantly higher than $1.199 billion in the same period last year