GameStop is a video game and gaming merchandise retailer based in the United States. This is an exciting industry that has become even larger as a result of the pandemic. As a result, GameStop’s stock has been soaring. Due to a short squeeze (a rapid increase in the price of a stock, primarily due to excess of short selling of a stock) coordinated by users of the Reddit forum r/wallstreetbets, the company's stock price recently skyrocketed. The company has gained a lot of media coverage as a result of its stock price volatility. However, after reaching its 52-week high stock price of $483.00 in January, it crashed to as low as $40.59 in February.
Source: Apple Stocks (Yahoo Finance)
This crash impacted many investors, but it wasn't the end of the road for GameStop. On March 10th, the stock increased sharply to $348.50 per share. The exchange then put the shares on halt due to volatility, followed by which the stock dropped to $190 before quickly regaining momentum and fluctuating between $240 and $280.
Once again, on the 15th of March, trading was temporarily halted, and the stock ended the day at $220.14, down 16.77% from its opening price.
According to Ihor Dusaniwsky of analytics firm S3 Partners, the short squeeze will continue. “We should see the GME short squeeze continuing and more short covering in the stock as mark-to-market losses mount,” he told Yahoo Finance late Wednesday. “But as the stock continues its rapid climb, there will be short sellers waiting in the wings looking for entry
points if this rally loses steam and GME’s stock price retraces.”
One explanation for GameStop's stock decline this week is not related to the company. Ironically, the correlation between meme stocks like GME, AMC and SND are strengthening, and their share price movements are closely following those of the others. They're also getting more interconnected with the wider stock market. Previously, GameStop stock could rise 50% in a single day even though the NASDAQ was down 5%. It now appears to be trading in line with other related stocks (but still much more volatile). On Tuesday, for example, GameStop's stock dropped around 5%. At the same time, AMC Entertainment
and Sundial Growers (SND) both fell by at least 5% too. The company announced that its fiscal fourth-quarter results would due to the increased volatility be released next week. Such results, like those of other so-called meme stocks common with retail traders, have put the company's rapid rise at risk. During the third quarter, GameStop’s e-commerce sales spiked by 257%, compared to a 24.6% decline
in-store sales.
According to the Zacks Consensus Estimate, the company is expected to post quarterly earnings of $1.46 per share in its upcoming report, marking a year-over-year improvement of +15 per cent. However, analyst forecasts for GME have recently changed, which investors should be aware of. These revisions usually reflect the most recent short-term market patterns, which are subject to change on a frequent basis. With this in mind, positive forecast changes can be viewed as a sign of optimism about the company's future prospects.