At this point, it feels like the market is just waiting for video game retailer GameStop Corp. (NYSE:GME) to follow in Blockbuster’s footsteps and go under.

Management has done everything possible to turn the business around. They fully capitalized on massive Nintendo Switch hype last year. They branched into selling phones. And they’ve created somewhat successful accessory and collectibles businesses.

Despite all that, GME stock just keeps dropping. Five years ago, it was a $50 stock. Two years ago, it was a $30 stock. Last year, it was a $20 stock. Now, GME stock trades around $13.

Will GME stock ever rebound?

Maybe.

I think this business has staying power through hardware sales and its new phone business. But that rebound won’t happen until the bleeding stops in the company’s pre-owned video game business. And there aren’t any signs that such bleeding will stop any time soon.

Thus, while I do think GME stock can and will rebound at some point, I’m not betting on that rebound here and now.

Here’s a deeper look:

GameStop Earnings Underscore Struggles

GameStop recently reported first-quarter numbers, and they underscore how weak GME’s underlying fundamentals are.

Last year, the company benefited from Nintendo Switch hype, so new hardware and new software sales actually weren’t that bad. But without that catalyst in Q1, new hardware and new software sales plummeted.

That shows just how dependent GameStop is on new product launches, implying that while the company’s new hardware and software businesses might have staying power, they will also be unattractively lumpy going forward. Lumpy businesses don’t get big multiples because they are hard to predict. As such, GME’s new hardware and software businesses will get a low multiple on a go-forward business.

Meanwhile, GameStop’s phone selling business, called “technology brands”, was supposed to save the day. But it hasn’t. In fact, it has done everything but that as red-hot growth has turned into persistent declines.

Eventually, the tech brands business should turnaround (phone demand won’t forever remain weak). But like the new hardware and software businesses, it has proven to be unattractively lumpy, and will consequently get a low multiple.

On the positive side, GameStop’s collectibles and accessories businesses are doing well, and aren’t lumpy. They have been consistent growers. They are also really small, however, combining for just 15% of sales last year. Thus, big and steady growth in these businesses doesn’t have much of a positive impact at the moment.

Turnaround Won’t Happen Until Pre-Owned Declines Stop

The one thing that does have a massive impact on GME stock is the performance in the pre-owned category.

Unfortunately, performance continues to be awful. In the most recent quarter, pre-owned sales dropped 5.8%, on top of a 4.6% decline last year and a 5.1% drop the year before that.

Why do declines here matter so much? Because the pre-owned category is GameStop’s big profit driver. The pre-owned category, even as it is declining, still accounts for roughly a third of the company’s overall gross profits.

Thus, as goes the pre-owned business so goes GME stock.

There really isn’t any reason the pre-owned business will turnaround any time soon. The digital shift in the video game industry is only growing in popularity, meaning the number of customers going to a GameStop and buying a pre-owned game will only decrease over the next several years.

As such, pre-owned sales will keep falling. Because pre-owned sales are the big profit driver, declines in pre-owned sales will lead to earnings erosion. As earnings keep falling, so, too, will GME stock.

Bottom Line on GME Stock

This stock won’t bounce back until bleeding in the pre-owned business stops. There are no signs that this bleeding will stop any time soon. Consequently, there are no signs that GME stock will rebound any time soon.

As of this writing, Luke Lango did not own a position in any of the aforementioned securities.