Is GameStop a good stock?
When assessing whether GameStop is a good stock to buy, it is crucial to realise that much of the movement in GME stock is not related to the company’s performance. Instead it is a classic "meme stock", its price reacting to surges in viral activities on social media and the like.
Should I Buy GameStop shares?
Should I buy shares of GameStop or any of the other high-flying stocks? The short answer is probably not. GameStop has already gone from a low of under $3 to a share price of $357 as I write this.
Who is buying GameStop stock?
Robinhood angered many retail investors when the company in January 2021 halted buying of shares in GameStop, AMC, and other meme stocks during a massive rally. Robinhood has since pledged to win ...
How to invest in GameStop?
Just follow these five easy steps:
- find a broker
- open your account
- fund the account
- buy the share
- review your position
Is it good to invest in GameStop stock?
Gamestop (GME) stock is likely to decline after the current overheated rally. The stock can still be profitable in the long term if revenue growth stays consistent. But investors should avoid buying GME stock due to the high short-term risk.
Did GameStop make money from stock market?
GameStop's stock price enjoyed gains through most of January 2021, but they exploded late in the month and peaked on Jan. 28, reaching a record high of $483. Shares of GameStop started the year at $19.
Why did Gamestops stock go up so much?
Why Did GME Stock Go Up? Shares of GME stock surged 1,600% in January. Individual investors coordinated a buying spree in the video game retailer's shares using online message boards. The buying surge caught the "shorts" who were betting the stock would fall off guard.
How does GameStop make most of its money?
While any kind of revenue growth is better than no revenue growth, gaming hardware tends to sell at very low margins. Historically, software sales have accounted for the bulk of GameStop's gross profit.
What did GameStop do with all the money?
The company erased its long-term debt, paying off everything "other than a $47.5 million low-interest loan associated with the French government's pandemic response." While not enough on its own to reverse GameStop's loss of sales over time, freedom from debt will likely be a meaningful benefit to the company going ...
Who profited from GameStop?
One veteran who said he made millions on GameStop was Bill Gross, the retired “bond king” and former star manager at California money management giant Pacific Investment Management Co.
What caused GME short squeeze?
A short squeeze can happen organically when a stock's price rises based on market conditions, such as good financial news. It can also happen purposefully, when investors target a heavily shorted stock to drive up its price knowing that short sellers must cover their positions before the stock's price gets too high.
Is GameStop profitable?
29, total revenue grew to $2.25 billion, but the company reported a net loss of $147.5 million, or $1.94 per share. That's compared with a profit of $80.5 million, or $1.19 per share, a year earlier. Adjusted loss per share for the fourth quarter was $1.86.
Are hedge funds still shorting GameStop?
On June 22, 2021, White Square Capital, a London-based hedge fund that was reported to have suffered "double-digit" losses betting against GameStop, announced that it would be shutting down.
How does GameStop survive?
GameStop's biggest asset to leverage is its customers. Building a value proposition around this group will give GameStop an edge in the gaming market, transforming their business model from a traditional retail model to a customer-focused e-commerce business model, like Amazon with Amazon Prime.
Is GameStop debt free?
GameStop Corp. announced plans to retire senior notes due in two years, leaving the company virtually debt free. The video-game chain said Tuesday it's redeeming $216.4 million of notes.
How much profit does GameStop make per game?
As is widely known in the industry, GameStop's used game sales are far more profitable than its sales of new games; new software and hardware yield margins of 21¢ and 6¢, respectively.
Short sellers are playing with fire
One of the most followed metrics by GME and meme stock investors in general is short interest. The greater the percentage of the float shorted, the more retail investors buy and hold the stock in hopes for a short squeeze.
GME ticker is highly popular
High short interest does not necessarily mean that the stock will undergo a short squeeze, neither that an investment is justifiable. For meme frenzy to kick in, two factors should be considered: high short interest and high popularity on the discussion boards. This seems to be GME’s case.
The Ryan Cohen factor
GameStop’s Chairman Ryan Cohen is seen by many investors as a key ally in GME's journey to the moon. As GameStop's largest single investor, he assumed leadership of the company’s board of directors and has since been quite vocal about how to ensure the success of the company and its stock.
Post-pandemic recovery
Elevated short interest, popularity among retail investors and visionary leadership help to set up GameStop stock for another leg higher. But often, a “little push” (more formally known as a catalyst) might be needed to get the snowball rolling.
Not a slam dunk
Having said the above, aspiring investors should know that investing in GME comes with substantial risks. The stock price has been very volatile in 2021, and a 2024 forward price-earnings ratio of more than 120 times, on the surface, screams overvaluation.
Twitter speaks
Recently, @WStreetMemes asked GME stock investors and enthusiast how confident they were about the leadership style of chairman Ryan Cohen. Feel free to vote and comment below!
Don't be left holding the bag after this unsustainable rally
As a writer with over five years of experience, Will Ebiefung has contributed to The Motley Fool and other wonderful clients. He focuses on consumer goods and technology companies.
1. The rally looks like market manipulation
According to The Wall Street Journal, retail investors are coordinating on social media to drive up the prices of heavily shorted stocks to trigger short squeezes -- or a chain reaction of short-sellers attempting to buy back shorted shares to exit their positions, causing the price to soar.
2. GameStop's business model may be broken
GameStop's revenue has declined at a compound annual growth rate (CAGR) of roughly 8% from fiscal 2015 to 2019. And the situation didn't improve in 2020 as the coronavirus pandemic continued to batter the retail industry by limiting consumer mobility.
How does all this end?
In the best-case scenario, GameStop could use its elevated share price as an opportunity to raise equity. But that won't necessarily benefit current investors who may face dilution.
A BASIS FOR GROWTH
GameStop’s initial surge wasn’t entirely unmoored from reality. Until earlier this month, the stock had been enjoying modest growth thanks to some small recent successes.
INFLECTION POINT
Still, Cohen’s appointment may have been a triggering event, sending GameStop’s previously natural growth into overdrive.
PICKING UP THE PIECES
Futter expects to see a reckoning for GameStop’s stock eventually, perhaps after the company’s next earnings report comes out in March. (GameStop’s fiscal year ends on February 1, which itself may be contributing the current sense of urgency among traders who need to return borrowed shares.)
The video game retailer is already down by more than half in just one month
Rich has been a Fool since 1998 and writing for the site since 2004. After 20 years of patrolling the mean streets of suburbia, he hung up his badge and gun to take up a pen full time.
Going online for the win
GameStop is just beginning its turnaround adventure. It has a new management team and board of directors that are like-minded in their vision for the retailer.
A war chest to back its plans
The video game outlet also used the investor frenzy over the stock to its benefit. A year ago, GameStop posted adjusted losses of $79.1 million, had $417 million in debt, and almost another $500 million in operating leases.
Time to put up or shut up
At this moment, GameStop is more like a penny stock with a good story. Think back to when everyone seemed to be a lithium miner because of the high demand for electric vehicle car batteries. Or when rare earth minerals were all the craze. The same happened with solar panels and even gold mining.
Putting a price on a rebound
For all the pummeling its stock has taken recently, GameStop's shares are still trading 4,000% above the level they were at one year ago. The true penny stock status it held back then was arguably just as unjustified as its current sky-high valuation, but it's not yet offering investors any discount. In fact, it's all premium and then some.
How armchair wolves could cost Wall Street billions! Amateur investors transformed companies' fortunes overnight as GameStop shares mania swept the world
The current trend began when one eagle-eyed Redditor noticed that investors had placed very hefty bets against games retailer GameStop.
How does 'shorting' a stock actually work?
Stocks typically benefit investors if the price goes up - they buy stock, the price increases if the company does well, then they sell it for a profit.
1. There Are No Gains or Losses Until You Sell
Whether the stock market increases by 20% or drops by 40%, these gains and losses don’t matter until it’s time to sell your holdings. That means as a long-term investor, you shouldn’t worry about the daily battles of the stock market. The GameStop situation and other volatile stock patterns will pass by as short-term blips.
2. Invest in Index Funds and Know Them
Investing long term in index funds allows you to buy a spread of the entire market or index you’re after. For example, you can invest in the top 500 U.S. companies, all at once. By buying into a large spread, you buy into a little bit of everything and offset potential risks that occur with these volatile manipulations or any one stock.
3. Stay Diversified
Though it’s good to be a long- term investor in the stock market, it’s also important to diversify your passive income in other wealth building streams such as real estate.
Completely Efficient Markets Are Not Realistic
Even staunch advocates for efficient markets, generally don’t believe markets are accurate everywhere all the time. There needs to be some so-called friction in markets in order for investors to exploit and make money.
Ultimately Prices Are Where Buyers And Sellers Meet
Finally, prices are where buyers and sellers meet. No one argues that efficient markets are broken when a company that’s due to be taken private at a fixed cash price doesn’t see it’s stock rally because it reports a strong quarter before the deal closes.
The Rally Looks Like Market Manipulation
Gamestop's Business Model May Be Broken
- GameStop's revenue has declined at a compound annual growth rate (CAGR) of roughly 8% from fiscal 2015 to 2019. And the situation didn't improve in 2020 as the coronavirus pandemic continued to batter the retail industry by limiting consumer mobility. Third-quarter sales fell 30% to $1 billion because of coronavirus-related challenges (such as closed storefronts in Europe) and …
How Does All This End?
- In the best-case scenario, GameStop could use its elevated share price as an opportunity to raise equity. But that won't necessarily benefit current investors who may face dilution. The stock could also face regulatory action from the SEC (which is monitoring the situation) or from exchanges themselves, some of which have recently restrictedbuying ...