GameStop (GME) shares tumbled over 22% on Thursday, March 27, marking its biggest one-day loss since June. The stock pulled back after the video game retailer announced plans to raise $1.3 billion through convertible notes to purchase Bitcoin (BTCUSD).

This dramatic reversal followed Wednesday’s nearly 12% rally. The company disclosed that it would offer convertible senior notes due in 2030 to qualified institutional buyers, with an option for purchasers to buy an additional $200 million in notes.

The notes will be convertible to cash, GameStop Class A shares, or a combination of both at GME’s discretion. Moreover, the conversion price represents a 37.5% premium over the stock’s weighted average price during trading on March 27.

The retailer “expects to use the net proceeds from the offering for general corporate purposes, including the acquisition of Bitcoin in a manner consistent with GameStop’s Investment Policy.”

GameStop’s Bitcoin-focused strategy appears to align with the investment philosophy advocated by Ryan Cohen, the company’s CEO and largest shareholder. However, the market’s initial reaction to the debt offering suggests investors remain skeptical about this dramatic pivot.

Is GameStop Stock a Good Buy Right Now?

Valued at a market cap of $9.87 billion, GameStop has been a volatile meme stock. In Q4 of its fiscal 2024, the video game retailer reported a revenue decline but improved profit margins. 

In fiscal Q4 (ended in January), GameStop posted net sales of $1.28 billion, down from $1.79 billion in the year-ago period. Despite the revenue decline, GME’s net income more than doubled to $131.3 million from $63.1 million over the last 12 months. The improvement in profitability came amid reduced selling, general and administrative expenses, which decreased to $282.5 million from $359.2 million.

Full-year results showed a similar pattern, with net sales declining to $3.82 billion from $5.27 billion in fiscal year 2023. Net income jumped to $131.3 million compared to just $6.7 million in the previous year. GME’s liquidity position strengthened significantly. It ended 2024 with roughly $4.8 billion in cash, cash equivalents, and marketable securities, up from $921.7 million a year earlier.

GameStop’s sales mix continues to shift, with hardware and accessories making up 54.9% of fiscal 2024 revenue, software 26.3%, and collectibles 18.8%. The company has also been streamlining operations, completing the divestiture of its Italy business, and winding down store operations in Germany.

What Is the Target Price for GME Stock?

Wall Street expects GameStop’s sales to fall to $2.5 billion in fiscal 2027. Comparatively, adjusted earnings are forecast to expand to $0.47 per share over the next three years. 

So, priced at 45x forward earnings, GME stock remains expensive. However, given its Bitcoin adoption strategy, the stock may align with crypto prices. A single analyst tracking GME stock recommends a “Strong Sell” with a target price of $10, down over 50% from current prices.