GameStop stock forecasts and forecasts
In 2021, GameStop was by far the most discussed title of the year. Earlier in the year (late January), this video game rental company faced a short tightening. This short crunch has dominated the news cycle and has been accompanied by several lawsuits, most of which are still pending.
If you’re not familiar, I’ll talk about what happened with GameStop’s stock at the start of the year. I’ll also be discussing what’s going on with GameStop right now. Finally, I’ll cover some pros and cons of investing in GameStop stocks going forward.
Let’s take a look at a quick stock forecast from GameStop …
To note: I am not a financial advisor and simply offer my own research and commentary. Please exercise due diligence before making any investment decisions.
GameStop Stock Forecasts (NYSE: GME)
To note: The price of GameStop has always been very volatile in the short term. Be careful if you plan to invest.
It’s almost impossible to discuss GameStop’s stock without first talking about what happened with the squeeze shorts. Here’s a quick lesson on what happened with GameStop:
- A major hedge fund (Citadel Securities) was borrowing tons of GameStop shares and selling them. In doing so, Citadel hoped that the share price would drop. If the price fell, Citadel would be able to repurchase the shares at a lower price. After redeeming them, she could return the shares to the people from whom she had borrowed them. Citadel would then make a profit on the price change. He basically wanted to sell when the price was high and buy back when the price fell. This process is called “shorting” an action.
- A group of traders on Reddit did what Citadel was up to. These traders rushed to buy as many GameStop shares as they could. This forced the price of GameStop’s shares to rise rather than fall and cost Citadel billions of dollars.
- Citadel still needed to buy shares in order to be able to return them. However, Reddit traders continued to buy and hold stocks. This forced the price to go up even higher.
- At one point, popular online brokerage firm Robinhood blocked its users from purchasing GameStop stock. Legal proceedings followed and investigations into the event are still ongoing. Mainly, people are trying to determine if Citadel Securities pressured Robinhood to prevent its clients from buying GameStop shares.
For more details on GameStop Short Compression, click here. This is important to know when looking at a GameStop stock forecast. And to learn more about short compressions in general, click here.
At the height of the squeeze, GameStop’s stock price peaked at around $ 350 per share. However, it is still up over 1,500% on the year and stands at around $ 170 per share.
In the short term, the GameStop share price has always been very volatile. This is still mainly due to the fact that traders are playing tug of war with the stock. By this I mean traders are still buying, selling, and holding stocks for reasons unrelated to GameStop’s business. There is no way to tell how long this will continue.
So what does this mean for GameStop’s stock going forward?
Predicting GameStop Actions
So far we have mainly discussed short compression. However, one of the main reasons Reddit traders have rallied around GameStop is that they still believe in the business.
It’s no secret that with the rise of e-commerce, GameStop’s brick-and-mortar strategy struggled. In fiscal year 2011-2019, sales increased from $ 9.5 billion to $ 6.4 billion. Net income also fell from $ 339 million to a loss of $ 470 million. What’s even worse is that the size of the global gaming market has actually grown exponentially over the same time period.
This is part of the reason why the stock has fallen around 90% since 2015. However, there is still hope for the company to pivot and turn the tide.
A big supporter of GameStop is Ryan Cohen, the former CEO of online pet supplier Chewy.com. This successful entrepreneur currently owns around 10% of GameStop. Cohen believes there is a great opportunity for GameStop to become the Amazon of video games (instead of the Blockbuster of Movies). He thinks GameStop is desperately clinging to its brick and mortar strategy. Instead, it needs to adopt a digital mindset. He believes GameStop should expand its e-commerce platform and incorporate new technologies into its business. Due to GameStop’s strong brand and customer base, this could be an extremely successful strategy.
GameStop’s latest earnings report was in July 2021. These numbers were mostly improved from last year. However, it’s important to remember that last July was the summer of COVID-19. COVID-19 most likely crushed GameStop’s business last year, resulting in over-inflated numbers this year. It’s a bit like running your first mile at half pace and crushing your mile time when you run at a normal pace on lap two. Of course, GameStop didn’t do this intentionally and this was the result of the COVID-19 restrictions.
In its July earnings report, GameStop reported:
- $ 1.18 billion in revenue (+ 25% year-on-year)
- – $ 61.1 million in revenue
- – $ 0.85 EPS
So what does this mean for GameStop investors?
GME stock forecasts
In the near term, I would expect GameStop’s stock price volatility to continue. This volatility will likely continue until the end of the surveys. This process can take months or even years.
Other than that, GameStop is a company that sails through uncharted waters. If it doesn’t innovate, there’s a good chance it will go bankrupt (as Blockbuster did). However, if he’s able to reinvent himself, GameStop’s action could pick up in the next few years.
Here are some of the most important innovations investors will look for:
- Build a strong e-commerce network for video game rentals
- Introducing video game streaming (Netflix has already beaten them on this).
- Potentially use new blockchain technology (especially NFTs) to bring more value to its customers.
Keep in mind that with this GameStop stock forecast, it may still drop in the short term even if these announcements are made. Indeed, many investors still think the stock is roughly 70% overvalued.
As usual, all investment decisions should be based on your own due diligence and tolerance for risk. When it comes to GameStop, investors seem particularly divided.
Some investors have long believed in the business of GameStop. If so, it might be wise to wait until the drama ends in the near term.
However, others might think GameStop is still in a hurry at this time. If that’s you, then short-term volatility might actually be a reason to buy.
Or, you might think GameStop is doomed anyway. If so, don’t hesitate to stay away.
Hope you have found this in-game stock forecast useful in deciding whether or not to invest. As usual, all investment decisions should be based on your own due diligence and tolerance for risk.
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About Teddy Stavetski
A graduate of the University of Miami, Teddy studied marketing and finance while playing for four years on the soccer team. He has always had a passion for business and used his experience from a few personal projects to become one of the top rated business copywriters on Fiverr.com. When he’s not hammering out words on paper, you may find him hammering notes on the piano or walking to a random place.