📈 Resilient Trader Trade Idea: The Contrarian Long on GameStop (GME)

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Resilient Trader is where smart traders come for vetted ideas.

Every week, we cut through the noise and surface opportunities that institutions are already eyeing - but with strategies tailored for retail traders. Today’s setup? A misunderstood transformation story in a stock the market loves to hate. No we are not expecting a monster short squeeze. But this company truly has rebuilt itself.

We’ll cover:

• Why GameStop is a Long at current levels

• How to take advantage with defined risk through a call option

🔍 Trade Thesis: GME's Transformation from Meme to Margin Machine

$GME ( ▼ 2.79% ) is no longer just a meme stock. Behind the curtain of market noise, a fundamental transformation is taking place. We believe the stock is heading higher, and the recent dip after a shelf offering announcement presents a prime buying opportunity.

Behind the scenes:

💎 Strategic Pivot: The company is shifting its focus from the declining physical video game market to the high-growth, more defensible collectibles business, which saw sales surge 63% year-over-year.

💰 Margin Turnaround: GME just posted its first positive operating margins since 2018, a massive operational achievement. The company is now targeting 12% margins over the long term.

✂️ Cost-Cutting Excellence: Aggressive cost-cutting, including exiting unprofitable markets like Canada, has dramatically improved the bottom line, with SG&A expenses down 19.2% YoY.

🏦 Fortress Balance Sheet: The market panicked over a shelf registration, but GME is sitting on a massive $4.6 billion in net cash and marketable securities. They don't need the money; they are securing strategic flexibility for potential deals.

📊 The Fundamentals Are Turning the Corner

Let’s break down the impressive Q2 results:

💰 Revenue: $972.2M, a solid 21.8% increase year-over-year.

📈 Net Income: A stunning swing to $168.6M from just $14.8M in the prior year.

💸 EPS: $0.25 per share, crushing the $0.01 reported last year and beating analyst estimates.

📈 Operating Margin: A positive 6.8%, a huge improvement from -3.6% in the same quarter last year.

📉 Gross Margin: Slipped to 29.1%, but this is expected as the business mix shifts to lower-margin hardware, which is a gateway for higher-margin software and collectible sales.

📐 Valuation Disconnect Creates Opportunity

GME is priced for failure, not for a successful turnaround:

⚖️ Price/Sales: 3.36x vs. Best Buy at 0.39x. The premium reflects GME's high-growth phase and transformation potential

💵 Cash Per Share: With $10.29 in cash per share, the market is valuing the entire operating business at just ~$14.

📉 Trading Range: The stock is currently trading near the low end of its 52-week range ($20.30 - $35.81), offering double-digit upside potential just to reach the top of the range.

🧭 Technicals Signal a Bottoming Process

❌ Current Price: $24.50

✅ Support: Strong support around the $22.84 level.

❌ Resistance: Near-term resistance at $26.45.

✅ Sentiment: Analyst ratings are universally "Sell," a classic contrarian indicator suggesting pessimism has peaked.

🎯 Targets: $30 (initial), $35 (intermediate)

💥 Trade of the Week: Defined-Risk Call Option

We’re combining a long equity position with a defined-risk options trade for leveraged upside.

🟢 Trade Setup

• Buy GME at $24.50

🛡️ Options Play

• Buy the April 17th $30 Calls for $2.47

  • Contract: April 17, 2026 $30 Call

  • Premium: $2.47

  • Delta: 41

📈 Risk-Reward

• Max Risk: $2.47 per share ($247 per contract)

• Max Reward: Unlimited

• Breakeven: $32.47

• Risk-Reward Ratio: Excellent, given the upside potential to the $35-$40 range.

🛑 Risk Management Tip

Set a stop-loss at $21.50 to protect against a break of the recent lows, limiting downside risk while allowing for significant upside.

🚀 Catalysts on the Horizon

Keep your eyes on:

1. Holiday Season (Q4) Earnings - Strong sales in the collectibles and hardware categories could surprise to the upside.

2. Margin Expansion - Continued progress toward the 12% margin target.

3. Strategic Announcements - Use of the $4.6B cash pile for acquisitions or investments in the collectibles space.

4. Technical Breakout - A move above the $26.50 resistance could trigger a sharp rally.

🧠 Final Thoughts

GME is a compelling contrarian long. The market is fixated on the old narrative while ignoring the impressive fundamental turnaround.

With a fortress balance sheet, a strategic pivot to a high-growth market, and the stock trading at a discount to its potential, this setup has all the ingredients for a significant rally.

✅ Buy GME at $24.50
💸 Buy the April 17th $30 Calls for $2.47

We'll be watching this one closely.

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Stay Liquid, my friends.
- The Resilient Trader

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