GameStop earnings are on deck. Here's how the stock typically reacts

Published Wed, Sep 8 20219:27 AM EDTUpdated Wed, Sep 8 202111:51 AM EDT

GameStop is set to report second-quarter results Wednesday after the bell. If history is any indication, investors should prepare for the stock to fall. The stock has dropped double-digit percentage points the day after earnings in each of the last four quarters, according to data from Bespoke Investment Group. The day after the company's first-quarter report in June, which topped analyst estimates, the stock shed 27%. In the prior quarter, when the embattled video game retailer missed estimates, the stock dipped nearly 34%. GameStop hasn't issued guidance during its last six quarterly updates as the company determines its brick-and-mortar presence in a world dominated by e-commerce. This has made it difficult for Wall Street analysts and investors alike to assess the company's turnaround plan. Earlier this year, the company named Chewy co-founder Ryan Cohen chairman, with plans for him to lead the company's efforts online. But so far, a clear strategy has yet to emerge. "As GameStop's board continues to shuffle the management deck, the goal to transform into a 'technology' company that delights gamers remains mostly a mystery, particularly as the video game industry accelerates the shift toward downloads, streaming and cloud services," analysts at Baird said in June following the company's most-recent results . MarketRebellion.com co-founder and CNBC contributor Pete Najarian noted that based on activity in the options market traders are expecting a more than 10% move following GameStop's earnings. The once-sleepy name has captivated the Street since January, when a new class of retail investors piled into the name, bidding shares higher at the expense of some Wall Street heavyweights who were short on the other side . Since then, the company has become the poster child of the so-called "meme-stock frenzy." The post-earnings swings are certainly large, but not completely out of character for a stock that has been known to be volatile even with no apparent catalysts. Taking a wider view and looking at post-earnings moves from the company's 77 prior quarterly updates, the average move has been a 3.05% decline, according to Bespoke. Shares were modestly higher during premarket trading, advancing 1% to about $201. The stock is down nearly 9% this month, but shares are still up 956% in 2021. Even as the stock has climbed higher, many on Wall Street remain skeptical. "There isn't anything that GameStop is likely to report in its second-quarter financial results on Wednesday that would justify the stock's current market cap of about $14.5 billion," noted David Trainer, CEO of investment research firm New Constructs. "We believe GameStop shares are trading off of the meme stock momentum and the stock's valuation remains completely disconnected from fundamentals. If the stock was trading on fundamentals, we believe the stock price would be closer to $30 per share," he added. —CNBC's Michael Bloom contributed reporting.

SELINSGROVE, PENNSYLVANIA, UNITED STATES - 2021/01/27: A woman walks past the GameStop store inside the Susquehanna Valley Mall. An online group sent share prices of GameStop (GME) and AMC Entertainment Holdings Inc. (AMC) soaring in an attempt to squeeze short sellers.

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GameStop is set to report second-quarter results Wednesday after the bell. If history is any indication, investors should prepare for the stock to fall.