GameStop (NYSE:GME) has undergone a significant short squeeze in buying since July. The GameStop supply/demand puzzle has been one of the more curious setups for years, as short sellers have dominated nearly all major trading moves. An astounding 67 million shares were sold short last month vs. 66 million in outstanding shares issued!
The vacillation between mindless selling and bouts of covering has made predicting price changes difficult. Nice operating cash flow has been measured against income losses, giving conflicting views of a business in slow but steady decline. Changing consumer order flow from new game console cycles has been another consideration when buying/selling shares. After the big upmove from $4 to $15+ a share in October, my argument is a prolonged breather in the equity quote is on deck. Here’s why.
GameStop has been a stock I have written about several times on Seeking Alpha. My last effort in August 2019 explained how Amazon (AMZN) should purchase the GameStop store network for local returns and pickups by Amazon customers. In addition, the full online integration of gaming software on the Prime subscription platform would have been a brilliant move. Amazon could have turned itself into the leading game delivery company for pennies on the dollar in 2019.
Image Source: Company Website
The idea would have been a boon for Amazon as another package pickup option, if the changeover had been done by early 2020, just before the COVID-19 outbreak. The shutdown of local retailers, including shopping malls, could have played into a deliver-to-the-parking-lot option for Amazon, similar to the incredibly successful Walmart (WMT) and Target (TGT) pick-up options. Order the Amazon goods online, then pick them up the same day or next day from the former GameStop location in your neighborhood.
Excuses for 2020 Short Squeeze
The huge ramp higher in GameStop’s equity price in the second half of 2020 has been partly caused by reformed shorts and new bullish capital inflows preparing for the new console cycle from Sony (SNE) and Microsoft (MSFT), just launched a few weeks ago. PlayStation 5 and Xbox Series S and Series X were just released in November. Typically, GameStop sales have spiked with the rush of consumer demand for new game boxes and upgraded software offerings.
Image Source: PlayStation Website
Image Source: Microsoft Xbox Website
The second reason for oversized buying in the stock has been massive growth in gaming revenues, as we all stay at home during the coronavirus pandemic, looking for things to do. Game hardware and software sales are up 20-30% vs. 2019 levels, as demand spikes for the industry. This heightened demand backdrop has supported GameStop’s online and store sales. The fiscal Q2 August quarter generated an 800% spike in digital sales. Today, online channels account for roughly 20% of GameStop's total revenue.
A third reason for short covering and a more bullish outlook has resulted from deals to take a royalty of online software sales from the likes of Microsoft on the new Xbox. The company announced its deal in October with Microsoft, which will carve out sales each time customers pay for subscriptions and full game downloads on a new Xbox purchased at a GameStop store. The press release summarizes it better,
Grapevine, Texas and Redmond, Wash. (October 8, 2020) – GameStop Corp. today announced that it has entered into a multi-year strategic partnership agreement with Microsoft Corp., further advancing its strategy to expand its physical and digital video game offerings, as well as enhance the company’s retail technology infrastructure. With over 5,000+ retail stores worldwide and its world-class eCommerce platform, GameStop leverages its vast customer network, PowerUp Rewards, and omni-channel capabilities to deliver enhanced gaming solutions to its customers. Through this partnership, GameStop will standardize the Company’s business operations on Microsoft’s cloud solutions and hardware products to deliver rich new digital experiences to customers, creating the -ultimate gaming destination- for gamers in its vision to be the premier omni-channel customer access point for video game products.
The company’s online future as a third-party, middleman seller for big and small video-game developers is likely the lifeline management has been searching for, to replace its original physical store, game cartridge and CD-focused business model. Rumors are Sony will have to follow suit and enter a similar royalty deal with GameStop to level the console selling field with Microsoft.
Stock Rally Running on Fumes
What’s interesting is the major shift in investor expectations in the last year. From nearly unanimous bearishness in August 2019, Seeking Alpha today is littered with bullish takes on the company’s future. The optimistic SA Authors rating is pictured below, and it appears to be more optimistic than Wall Street analyst views or the computer ranking of underlying business conditions.
For a company expected to still report a significant operating loss in 2020, the current 2-year high price is getting stretched. Even an optimistic reality of positive EPS will take another 18-24 months to materialize, according to Wall Street analyst consensus pictured below.
Technical Momentum Warning Signs
From my technical research, the odds suggest a momentum and price peak have already occurred. Last month’s $15 price may be the high-water mark for some time, if I am correct. The 2-year chart below highlights some of my concerns for the bullish crew. Anecdotally, the rush to all-time highs in the Dow Industrials this week did nothing to push GameStop into steeper gains. In fact, Tuesday’s action witnessed sizable selling and profit-taking in GameStop.
I have drawn the bottoming out condition in the stock during late 2019, with a green arrow pointing to my last bullish story on the stock in August, under $4 a share. The current picture is almost the reverse image for some indicators like the 21-day Average Directional index [ADX]. At the bottom of the chart I have drawn purple circles around the extreme ADX positions, and the subsequent breakdown in momentum. While the 2019 version expressed a true "oversold" point had been reached, the October-November 2020 circumstance seems to be screaming an intermediate-term "overbought" condition has been achieved.
I also don’t like the sharp downturns in the Accumulation/Distribution Line [ADL] and Negative Volume Index [NVI] during November. The weak ADL indicator (blue arrow) means the stock is consistently closing near the low trade of the day. Selling during the day is typically a bad omen. The sliding NVI signals few buyers are showing up on falling volume days vs. the previous session (look for the red arrow). An absence of buying on weakness is not a regular formula for success either.
Without doubt, good news from the company would propel the stock to new highs. But a long list of recurring issues, and potential new operating problems could reverse the stock quote into a downtrend. My worry is the stock has discounted numerous positive developments, while a double-dip coronavirus recession in consumer spending and/or a bearish stock market trend generally in the U.S. could weigh on GameStop pricing. Technically speaking, a retracement move to $8 a share shouldn’t shock anyone, and wouldn’t dent a long-term bullish pattern move to new highs in 12-18 months.
Final Thoughts
We may have reached a classic “sell the news” event, with the rollout of the new video-game console cycle a few weeks ago. Momentum indications seem to be reversing to the downside, and the contrarian in me says investors are getting ahead of themselves with ultra-bullish views for GameStop. Will the price crash back to $5 a share? Probably not, but outsized gains beyond the current $14 quote are not likely either. At this juncture, I don’t have strong feelings either way for this equity. A Neutral or Hold rating is the best-case outlook I can argue.
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This article was written by
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Nationally ranked stock picker for 30 years. Victory Formation and Bottom Fishing Club quant-sort pioneer.....Paul Franke is a private investor and speculator with 36 years of trading experience. Mr. Franke was Editor and Publisher of the Maverick Investor® newsletter during the 1990s, widely quoted by CNBC®, Barron’s®, the Washington Post® and Investor’s Business Daily®. Paul was consistently ranked among top investment advisors nationally for stock market and commodity macro views by Timer Digest® during the 1990s. Mr. Franke was ranked #1 in the Motley Fool® CAPS stock picking contest during parts of 2008 and 2009, out of 60,000+ portfolios. Mr. Franke was Director of Research at Quantemonics Investing® from 2010-13, running several model portfolios on the Covestor.com mirror platform (including the least volatile, lowest beta, fully-invested equity portfolio on the site). As of February 2023, he was ranked in the Top 5% of bloggers by TipRanks® for stock picking performance on positions held one year.A contrarian stock picking style, along with daily algorithm analysis of fundamental and technical data have been developed into a system for finding stocks, named the “Victory Formation.” Supply/demand imbalances signaled by specific stock price and volume movements are a critical part of this formula for success. Mr. Franke suggests investors use 10% or 20% stop-loss levels on individual choices and a diversified approach of owning at least 50 well positioned favorites to achieve regular stock market outperformance. The short sale of securities in overvalued, weak momentum stocks as pair trades and hedges is also a part of the Victory Formation long/short portfolio design. "Bottom Fishing Club" articles focus on deep-value candidates or stocks experiencing a major reversal in technical momentum to the upside. "Volume Breakout Report" articles discuss positive trend changes backed by strong price and volume trading action.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: This writing is for informational purposes only. All opinions expressed herein are not investment recommendations, and are not meant to be relied upon in investment decisions. The author is not acting in an investment advisor capacity and is not a registered investment advisor. The author recommends investors consult a qualified investment advisor before making any trade. This article is not an investment research report, but an opinion written at a point in time. The author's opinions expressed herein address only a small cross-section of data related to an investment in securities mentioned. Any analysis presented is based on incomplete information, and is limited in scope and accuracy. The information and data in this article are obtained from sources believed to be reliable, but their accuracy and completeness are not guaranteed. Any and all opinions, estimates, and conclusions are based on the author's best judgment at the time of publication, and are subject to change without notice. Past performance is no guarantee of future returns.
FAQs
How high can GME realistically go? ›
Targets for 2022, 2023 and 2025
It further predicted GME could reach $42.47 by the end of December 2023 and close 2025 at $72.54.
GameStop's "Squeezeversary”
GME jumped 15% despite there being no significant news related to the company. This significant rise in share price was accompanied by a rise in volume (also by about 15%). Nearly 9.2 million shares of GME traded hands on Friday, with retail traders' sentiment likely driving up the volume.
In January 2021, a short squeeze of the stock of the American video game retailer GameStop (NYSE: GME) and other securities took place, causing major financial consequences for certain hedge funds and large losses for short sellers.
Can GME go back up? ›Based on the volatility of GME shares in 2022, we can say that GameStop's retail investors endured an extremely difficult year much better than many expected. So expect GME to flourish again in 2023, especially in the event of growth in the broader market.
Will GME reach $100? ›Going forward, GameStop's shareholders can monitor the trading volume on the company's NFT marketplace with ImmutableX. If the data indicates growth, this should provide a significant revenue boost for GameStop. With that, and possibly with the assistance of Reddit traders, GME stock could easily reach $100 in 2023.
What will GME price be in 2023? ›Gamestop Corporation - Class A quote is equal to 16.710 USD at 2023-03-14. Based on our forecasts, a long-term increase is expected, the "GME" stock price prognosis for 2028-03-08 is 67.664 USD. With a 5-year investment, the revenue is expected to be around +304.93%.
What is the highest GME stock has ever been? ›- The all-time high GameStop stock closing price was 86.88 on January 27, 2021.
- The GameStop 52-week high stock price is 49.85, which is 197.6% above the current share price.
- The GameStop 52-week low stock price is 15.41, which is 8% below the current share price.
What Was the Bigggest Short Squeeze in History? The biggest short squeeze in history happened to Volkswagen stock in 2008.
How many shares of GME are shorted? ›| Avg Vol (3 month) 3 | 4.98M |
|---|---|
| Float 8 | 260.22M |
| % Held by Insiders 1 | 15.62% |
| % Held by Institutions 1 | 27.00% |
| Shares Short (Jan 13, 2023) 4 | 60.34M |
Fib Retracement Confirms the GME Stock Price's $40 Valuation
If the GME stock price crosses the $40 resistance level in the middle of 2023 and continues to rise at high throttle, Fib retracement reveals that it can be valued at around $65 by the end of 2023.
How long will short squeeze last? ›
How long does one last? Depending on the amount of stock shorted, a short squeeze can last anywhere between a few days and a few months. One way to calculate this is through the short interest ratio – dividing a company's shorted stocks by its average daily trading volume.
How much of GME is shorted right now? ›The short volume for $GME is 64.18% on 2023-03-13. The short sale volume is 0.64M, long sale volume is 0.36M. The total volume is 1M. The short sale volume is -12% compared to 2023-03-10.
Does GameStop have a future? ›GameStop has entered a new phase of its transformation during the back half of 2022. As a result, GameStop is focused on two overarching goals: attaining profitability in the near-future and generating sustainable growth over the long-term.
Who holds the most GME stock? ›Who owns Gamestop? Gamestop (NYSE: GME) is owned by 27.95% institutional shareholders, 10.63% Gamestop insiders, and 61.42% retail investors. Ryan Cohen is the largest individual Gamestop shareholder, owning 9.10M shares representing 2.99% of the company. Ryan Cohen's Gamestop shares are currently valued at $156.99M.
Should I sell my GameStop stock? ›(GME) an Analyst Rating Rank of 1, meaning GME is ranked higher by analysts than 1% of stocks. The average price target for GME is $12.65 and analyst's rate the stock as a Sell. Wall Street analysts are rating GME a Sell today.
What are GME earnings predictions? ›(NYSE: GME) Gamestop's forecast annual earnings growth rate of N/A is not forecast to beat the US Specialty Retail industry's average forecast earnings growth rate of 6.14%, and while it is not forecast to beat the US market's average forecast earnings growth rate of 78.66%.
What can I expect from GME earnings? ›The Change in Consensus chart shows the current, 1 week ago, and 1 month ago consensus earnings per share (EPS*) forecasts. For the fiscal quarter endingApr 2023 , the consensus EPS* forecast has increased over the past week from 1.9 to 1.91(0.53%) and decreased over the past month from 2.03 to 1.91(5.91%).
What is GME earnings forecast? ›Earnings announcement* for GME: Mar 16, 2023
According to Zacks Investment Research, based on 3 analysts' forecasts, the consensus EPS forecast for the quarter is $-0.16. The reported EPS for the same quarter last year was $-0.47.
| Low | Estimated Value | High |
|---|---|---|
| 12.40 | 17.28 | 22.16 |
When setting a stock's price target, an analyst is trying to determine what the stock is worth and where the price will be in 12 or 18 months. Ultimately, price targets depend on the valuation of the company that's issuing the stock.
What is future price of a stock? ›
A futures price is determined by the cost of its underlying asset and moves in sync with it. The cost of futures will rise if the cost of its underlying increases and will fall as it falls. But it is not always equal to the value of its underlying asset. They can be traded at different prices in the market.
How many people are holding GME? ›GameStop Corp. (US:GME) has 525 institutional owners and shareholders that have filed 13D/G or 13F forms with the Securities Exchange Commission (SEC). These institutions hold a total of 91,666,551 shares.
When did GME hit 483? ›The GameStop crash was all but inevitable as investors, specifically subscribers to the r/WallStreetBets subreddit, pushed GameStop (Ticker: GME) from $18.84 per share on Dec. 31 to $483 during intraday trading on Jan. 28.
How many shares of GME do insiders own? ›...
GME / GameStop Corp. - Insider Trading and Ownership Report - SEC Form 3, 4, 5.
| Shares Outstanding | 304,278,070 shares |
|---|---|
| Insider Shares | 48,697,498 shares |
| Insider Ownership | 16.00% |
| Total Insiders | 14 |
As of February 2023, the most shorted stock was for, the American fintech and cryptocurrency bank, Silvergate Capital with 73.44 percent of their total float having been shorted.
What is the mother of all short squeeze? ›MOASS, Mother of All Short Squeezes, is a trading strategy in which a high volume of buyers drive up shares of stocks that were being “shorted” by other investors.
Can a short squeeze be stopped? ›Always have a stop loss.
For example, if a company's stock is trading at $10 and you short it, you can have a stop loss at $13. In this case, if there is a short squeeze, the trade will be stopped automatically when it hits $13.
| Symbol Symbol | Company Name | Price |
|---|---|---|
| ALLO ALLO | Allogene Therapeutics Inc. | $5.59 |
| APRN APRN | Blue Apron Holdings Inc. | $0.78 |
| WE WE | WeWork Inc. | $0.94 |
| UPST UPST | Upstart Holdings Inc. | $14.50 |
Settlement time is two days after the transaction. In that time, the same shares can be lent out again, and again. This makes it possible, on paper, for more than 100% of the float of a stock to be shorted.
What is the number one most shorted stock? ›No. 1: Silvergate Capital (SI), short interest 70.16%.
Can GME reach $1000? ›
So, can GME stock reach $1,000 per share. It's certainly a possibility given that GameStop's dark pool trading percentage is rather high, according to Stonk-O-Tracker data. Dark pool trading in GameStop has ranged between 30%-50%. This means 30%-50% of short selling has occurred behind closed doors.
Are people still holding GME stocks? ›...
About GME.
| Symbol | Last Price | % Chg |
|---|---|---|
| GMEPost | 18.70 18.75 | 2.80% 0.27% |
Analysts' Picks - In 2023, analysts and experts believe that two key factors will determine how well stocks perform. These are CAPEX and credit growth. Consequently, stocks to look for in 2023 would largely be in the BFSI, infrastructure, defence, capital goods, housing, railways and cement sectors.
Do stocks Go Down After a short squeeze? ›Key Takeaways. A short squeeze happens when many investors bet against a stock and its price shoots up instead. A short squeeze accelerates a stock's price rise as short sellers bail out to cut their losses. Contrarian investors try to anticipate a short squeeze and buy stocks that demonstrate a strong short interest.
What happens when short squeeze is over? ›When this happens, the stock is being bought up and the shorts are now forced to cover their positions (getting squeezed out), which then results in more buying, causing the stock to go up very quickly and by a lot. You can find short information on stocks through most financial sites like Yahoo and Google Finance.
How many days to cover is good for a short squeeze? ›The other useful metric here is the "short ratio," or "days to cover," which is the number of days of normal trading it would take to generate enough trading volume to buy back all the shares sold short. There is no hard and fast rule here, and opinions vary widely, but a decent rule of thumb is 10 days.
What happens if you short a stock and it gets delisted? ›What happens when an investor maintains a short position in a company that gets delisted and declares bankruptcy? The answer is simple—the investor never has to pay back anyone because the shares are worthless.
What happens to heavily shorted stocks? ›When a stock is heavily shorted, and investors are buying shares — which pushes the price up — short sellers start buying to cover their position and minimize losses as the price keeps rising. This can create a “short squeeze”: Short sellers keep having to buy the stock, pushing the price up even higher and higher.
Is GameStop a buy or sell? ›GameStop has received a consensus rating of Sell. The company's average rating score is 1.00, and is based on no buy ratings, no hold ratings, and 1 sell rating.
Is GameStop still doing good? ›Over the past three years, GameStop (GME) - Get Free Report has shown investors total returns of a whopping 1,025%. However, in 2022, shares of the video game retailer plunged roughly 49%. GameStop bulls are hoping that 2023 will turn out better than last year… and there's a good possibility this may be the case.
What is GameStop turning into? ›
After rocketing to meme stock status during the pandemic, GameStop's wild ride has continued in 2022 as the company's new leadership team sets out to transform the video game retailer into a “technology business and help create enduring value for stockholders.” In May, retail veteran and former Belk interim CEO Nir ...
How many GME shares does BlackRock own? ›2022-02-01 - BlackRock Inc. has filed an SC 13G/A form with the Securities and Exchange Commission (SEC) disclosing ownership of 5,194,518 shares of GameStop Corp. (US:GME). This represents 6.8 percent ownership of the company.
How many Class A shares does GME have? ›ETF.com Insight
GameStop Corp. Class A is a company in the U.S. stock market and it is a holding in 97 U.S.-traded ETFs. GME has around 27.7M shares in the U.S. ETF market. The largest ETF holder of GME is the iShares Core S&P Mid-Cap ETF (IJH), with approximately 7.92M shares.
GameStop stocks Xbox, PlayStation, Nintendo, and other consoles under one roof, increasing its competitive advantage. On the other hand, Microsoft sells directly and indirectly to consumers via its stores and GameStop retail competitors like Best Buy, Amazon, Walmart, and Target.
How high will GME stock go? ›Gamestop Corporation - Class A quote is equal to 18.770 USD at 2023-03-06. Based on our forecasts, a long-term increase is expected, the "GME" stock price prognosis for 2028-03-01 is 70.631 USD. With a 5-year investment, the revenue is expected to be around +276.3%.
Is GameStop expected to go back up? ›Based on the volatility of GME shares in 2022, we can say that GameStop's retail investors endured an extremely difficult year much better than many expected. So expect GME to flourish again in 2023, especially in the event of growth in the broader market.
What is the target price for game stock? ›Their GAME share price forecasts range from $3.00 to $3.00. On average, they predict the company's share price to reach $3.00 in the next year. This suggests a possible upside of 50.8% from the stock's current price. View analysts price targets for GAME or view top-rated stocks among Wall Street analysts.
What should the real price of GME be? ›| Nasdaq Last Sale (NLS) Plus Volume | 2,845,498 |
|---|---|
| Previous Close | $17.52 |
| Today's High / Low* | $17.7657/$16.85 |
| 52 Week High / Low | $49.8525/$15.41 |
- The all-time high GameStop stock closing price was 86.88 on January 27, 2021.
- The GameStop 52-week high stock price is 49.85, which is 197.6% above the current share price.
- The GameStop 52-week low stock price is 15.41, which is 8% below the current share price.
...
5.9 B.
| Low | Estimated Value | High |
|---|---|---|
| 12.40 | 17.28 | 22.16 |
How much is GME in debt? ›
| GameStop Annual Long Term Debt (Millions of US $) | |
|---|---|
| 2020 | $420 |
| 2019 | $472 |
| 2018 | $818 |
| 2017 | $815 |
Institutional Investors Going Long GME
The leading shareholding institution is RC Ventures - headed by none other than GameStop's Chairman of the Board, Ryan Cohen. RC holds about 12% of GameStop's total shares. Vanguard and BlackRock are close behind, holding about 8% and 7% of the company's shares, respectively.
| Holder | Shares | Date Reported |
|---|---|---|
| Vanguard Group, Inc. (The) | 24,664,433 | Dec 30, 2022 |
| Blackrock Inc. | 21,977,404 | Dec 30, 2022 |
| State Street Corporation | 7,254,369 | Dec 30, 2022 |
| Geode Capital Management, LLC | 3,495,649 | Dec 30, 2022 |
Who owns Gamestop? Gamestop (NYSE: GME) is owned by 27.95% institutional shareholders, 10.63% Gamestop insiders, and 61.42% retail investors. Ryan Cohen is the largest individual Gamestop shareholder, owning 9.10M shares representing 2.99% of the company. Ryan Cohen's Gamestop shares are currently valued at $152.44M.
Who owns most of GME? ›| Stockholder | Stake | Total value ($) |
|---|---|---|
| The Vanguard Group, Inc. | 7.98% | 531,790,198 |
| BlackRock Fund Advisors | 6.69% | 445,767,965 |
| SSgA Funds Management, Inc. | 2.38% | 158,653,050 |
| Geode Capital Management LLC | 1.15% | 76,449,844 |
...
GME Fair Value (Implied Value)
| Earnings per Share (ttm) | |
|---|---|
| Years | Growth Rate |
| 5 Yr | -14.7% |
GME does not currently pay a dividend.
What is the current short interest of GME? ›The short volume for $GME is 61.360% on 2023-02-08. The short sale volume is 0.69M, long sale volume is 0.44M. The total volume is 1.13M. The short sale volume is -70% compared to 2023-02-07.
Would you consider GameStop a profitable firm? ›GameStop is a video-game retailer that has been wrestling with negative profit margins and slowing sales. In the last three quarters, the company reported a net loss of $234 million, compared to a loss of $296 million in the year-ago period. Its operating cash flow also stands at a negative $324 million in fiscal 2022.
Should you sell overvalued stock? ›By the same token, though, holding on to a company that is overvalued is a risk. In these situations, it's typically best to sell your stock and be happy with the profits you've made no matter what the stock does in the future.