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Unless you’ve been hiding in a bunker for a year, you’ve probably heard of a small video game retailer known as GameStop (NYSE: GME). In 2020, the Reddit community called WallStreetBets started receiving messages from an anonymous trader (whose name we can’t print here, but you know who he is). In these articles, he detailed a long thesis on actions based on the ability to create a gigantic short squeeze. Many large institutions had taken huge short positions against the stock, predicting the ruin of a physical store as the industry quickly moved away from physical copies of games.
The rest was history. The short squeeze was performed and probably turned out to be more important than even the biggest supporters suggested. GME shares have clung to the proverbial rocket and have reached all-time highs. The stock closed just below $ 14 per share on December 16. Just 6 weeks later, she hit an intraday high of $ 483, and Ja Rule was on CNBC discussing her place in her portfolio. The start of 2021 was definitely a bit surreal.
Like all short cuts, the GME rally finally fizzled out. If you got in early, you’re still ahead of the game, but the stock has fallen below $ 200 as of this writing. What future for GME?
GME stock market position
|GameStop||$ 177.70||Buy stocks|
GameStop is headquartered in Grapevine, Texas, and employs over 12,000 people full time. Originally incorporated in 1996, GameStop currently has approximately 4,800 operating stores in North America, Europe and Australia.
The company currently has a market cap of $ 13.6 billion, which is about 26 times higher than it was a year ago before the massive tightening. GME saw its market cap hit a skyrocketing $ 23 billion during the squeeze, but like stocks, that number fell a bit. Of course, this is still paltry compared to other retailers selling video games like Target (NYSE: TGT), Walmart (NYSE: WMT) and Amazon (NASDAQ: AMZN). Same Microsoft (NASDAQ: MSFT) sells games on their XBox Live network store. Unfortunately for GameStop, its competitors in the space are some of the biggest hitters in public markets.
Market capitalization is often a better barometer of a stock’s potential because it represents the total value of all stocks outstanding. Some companies have stocks priced at $ 50 with a market cap of over $ 100 billion, while others may have stocks of $ 200 and a market cap of less than $ 10 billion. The stock price doesn’t tell you much about the value of the underlying business.
Bull case of the analyst for the GME share
As of this writing, you would be hard pressed to find an analyst giving this stock a buy rating. The majority of analyzes on the stock are bearish and no buy note has been issued since the end of 2020. The last 2 agencies to have issued buy notes for GME shares, Jeffries (NESE: JEF) and Telsey Advisory Group, have since downgraded the title. Jeffries maintains a hold rating on the stock, but his price target is just $ 13.
Wedbush analyst’s argument for GME stock
For the bear case, many more analysts are willing to throw their hats in the ring, including Wedbush analyst Michael Pachter, who covers retail, software and entertainment for the company. Pachter says the GME share price is completely out of touch with reality due to the short squeeze, and even a return to profitability (which he says will eventually occur) will not justify the current inflated price of the stock market. action. Pachter has a target price of $ 50 on GME stocks.
GME share price history
The past 12 months have been a roller coaster ride for GME shareholders. However, those looking to enjoy another short-term squeeze or a quick boost will likely be disappointed. The stock remains above its 50-day and 200-day moving averages, but the price share and 50-day average appear on a collision course. From a technical point of view, there is nothing too attractive about a long-term investment in GME. And judging by the turnover and profit growth, the fundamentals aren’t too rosy either.
Where to buy GME shares
Looking to trade GME shares? You will not run out of options with brokers. Almost all of the major online discount brokers have GME stocks available for purchase – here are some of Benzinga’s favorite picks:
How long will it take for GME stock to hit $ 400 again?
If you’re waiting for GME stocks to hit their previous highs, you might want to grab a seat and a good book. Will GME hit $ 400 per share again? Maybe at some point in the future, but unless the company gives up on stock splitting as market capitalization increases, a price of $ 400 on a GME stock seems an unlikely target.
Short squeezes are not based on a fundamental valuation of the company but on positions held by other traders. Too many shorts can create upward pressure on the stock if the price rises and large short positions need to be hedged. Video game sales, marketing, or business strategy don’t have much to do with it – hedge funds and WallStreetBets have simply turned that stock into a toy.
GME stock may not revisit previous highs anytime soon
GameStop introduced Chewy Inc (NSDQ: CHWY) founder Ryan Cohen in an attempt to springboard his footprint online, and with new gaming consoles on the horizon, the company may soon return to profitability.
However, the stock run of even 2021 was not based on fundamentals. The market was teeming with liquidity and a few smart online traders noticed the outrageous short positions being built against GameStop, so they turned the fire hose on the shorts. The resulting price explosion made many retail traders rich, but lightning rarely strikes twice. GameStop is unlikely to turn someone into a millionaire overnight. In fact, the business has more than one headwind against it. The party here could unfortunately be over.
Frequently Asked Questions
Is GME a good investment?
Is GME a good investment?
Fundamentally, GME doesn’t do much from a sales and profit standpoint to justify its consistently high stock price. Even the most bullish analysts have price targets below $ 100 for the stock.
Is GameStop profitable?
No, the company has faced declining revenues in the past 4 years and missed profit targets in 2 of the last 4 reports. The most recent statement from the company showed negative net profit.
Is GME in a bubble?
Many analysts have claimed that GME is in a bubble; However, the actual bubble period may have ended in January when stocks tripled above the $ 480 mark before falling back below $ 200. While the current stock price isn’t backed by fundamental financial data, that doesn’t necessarily mean the stock is a bubble ready to burst anytime.
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