The GameStop (GME  ) saga continues. Bulls and bears were highly anticipating the company's Q4 earnings which would be the first since the short squeeze started. Additionally, after earnings, the company's window would open to take advantage of its elevated stock price by raising money by issuing more shares.

Earnings underwhelmed in that there was nothing in it to validate the stock's extraordinary, recent gain, resulting in the stock price tumbling by 35%. However, the bulls eagerly bought on this weakness the next day which ended up with shares soaring by more than 50% to close above their pre-earning levels.

Inside the Numbers

GameStop missed on Q4 earnings on the top and bottom-line but more importantly, it failed to give any update that would have justified the stock's 850% YTD gain. For the quarter, GameStop earned $1.34 per share on revenue of $2.1 billion. This fell short of analysts' expectations of $1.35 in EPS and $2.2 billion.

One reason for weakness following the report is that while EPS was mainly in-line with expectations it was due to a tax benefit rather than operating profits. The company also didn't take any questions on the conference call or make any announcements other than saying it might look to sell shares in the near-term.

Prior to its short squeeze, many believed that the company was in a secular decline due to video game sales moving online and declining foot traffic. Many got excited by Chewy (CHWY  ) founder, Ryan Cohen's purchase of more than 10% of shares who could help the company make the shift to ecommerce.

However, the bearish thesis was also thwarted by a surge in video game sales due to the coronavirus and the launch of two new consoles. Cohen's efforts also seem to be yielding fruit as ecommerce sales increased by 175% compared to last year and accounted for a third of revenue.

Stock Price Outlook

GameStop shares seem to be totally disconnected from fundamentals or the broader market. It would be reasonable to expect that the mania would end with this earnings report which seems to confirm that any digital transformation will take time with no certainty of success. Additionally, retail internet in the market seems to have declined with many speculative names crushed over the past month.

However, investors eagerly bought on a weakness which pushed shares back above their pre-earnings levels. While the stock could certainly keep moving higher, there's less to like at current levels. Shorts have been squeezed and are out of the stock. The company is going to issue shares which will increase supply. So, investors should steer clear and GameStop is unlikely to exceed its highs from January.