GameStop Corp. (GME) is now solidly free cash flow positive, as its FCF margin last quarter was 12.4% of sales. Its upcoming June 9 results will show how much Bitcoin it may have bought. These two factors could push GME stock even higher.

GME closed at $33.03, up +7% on Friday, May 23, and up +16% in the last week ($28.45 close on May 16). Investors will focus on its expected June 9 after-market close results for the quarter ended May 1, 2025.

GME is still below its one-year peak (June 6, 2024) price of $46.55. But could it get there after these results? That would be over 40% higher and give it a potential market cap of over $20.8 billion. 

I think it's possible, and this article will show why that could potentially happen.

Investors Might Expect Strong Free Cash Flow (FCF) and Bitcoin Results

Last quarter generated strong free cash flow (FCF) and FCF margins. That is not readily apparent from the 10-K filing of March 25 for the full-year results ending Feb. 1, 2025.

But it can be seen using the quarterly results pages from Seeking Alpha. For example, Seeking Alpha shows in its Cash Flow tab that for the quarter ended Feb. 2, GameStop generated $162.3 million in operating cash flow (OCF). 

That is the highest amount of OCF it has produced in the past 3 quarters since it has become cash flow positive (i.e., compared to 68.6m in Q2, $24.6m in Q3). Moreover, after deducting capex spending, GameStop is also strongly free cash flow (FCF) positive:

  $162.3m OCF in Q4 2024 - $3.5 million capex Q4 = $158.8m FCF in Q4 2024

That represented 12.3% of its Q4 revenue of almost $1.3 billion (i.e., $1.2846 billion according to Seeking Alpha's revenue tab). That Q4 12.3% FCF margin was significantly higher than the past 2 quarters' FCF margins:

   Q3:  $20m FCF / $860.3m sales = 2.3% FCF margin

   Q2:  $65.5m FCF / $798.3 sales = 8.2% FCF margin

Forecasts. As a result, if GameStop can keep this up, its FCF for this fiscal year could skyrocket. Let's project this out.

For example, analysts now estimate that sales this fiscal year will be $3.56 billion. However, this sales amount is lower than last year's $3.823 billion, and analysts project lower FY 2026 sales of just $3.13 billion, as its store sales decline. 

That means over the next 12 months (NTM), its average run rate sales will be just $3.345 billion. So, applying a 13% FCF margin:

  $3,345m NTM sales x 0.13 FCF margin = $434.5 million FCF

Just to be conservative and make an easy forecast, let's round that down to $430 m. How will the market value that?

Target Price for GME Stock

I suspect the market will consider this FCF margin sustainable. As a result, it could apply a 2.5% FCF yield metric (i.e., the same as a 40x FCF multiple):

  $430m FCF x 40 = $17,200 million  = $17.2 billion market cap

That is +16.4% higher than GameStop's present $14.774 billion market cap, according to Yahoo! Finance.

In other words, GME stock could be worth at least 16.4% more:

  $33.03 x 1.164 = $38.44 per share

However, all bets are off if GameStop's Q1 2025 results show a much higher FCF margin than 12.3%. Here is one scenario:

  15% FCF margin x $3.345 NTM sales = $501 million FCF 

If that happens, the market will likely raise the multiple to 2.0% (i.e., 50x FCF):

  $501m FCF x 50x = $25.05 billion market cap est.

That is +69.6% higher than today's $14.774 billion market cap, implying a stock price target of $56.00 per share!

What to Expect

So, you can see that just a small increase in its FCF margin can result in a huge gain in the target price. If its projected FCF margin ranges from 13% to 15%, it could end up somewhere between $38.44 and $56.00 ($47.22 on average).

Of course, as the company announced on March 25, that does not include any contribution to the company's valuation from potential Bitcoin purchases. 

(That will make all bets off, as it could dramatically affect the company's business model. It may, in effect, become a copycat of Strategy Inc. (STRK), after it started buying Bitcoin and now has over a $100 billion market cap.)

The bottom line is that GameStop's upcoming results will have a dramatic, almost inflection point effect on its target price projections. Be prepared for a potential surge, especially if its FCF margins and/or Bitcoin purchases surprise the market.

On the date of publication, Mark R. Hake, CFA did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.