And while the stock is down 68% from its January highs, but it’s still been an amazing run for GameStop (GME) investors. GameStop doesn’t have sustainable earnings, so we cannot value it that way. However, we can value it using price-to-sales, and we’ll do that below to get a sense of what we’re dealing with.
But now it’s up to earnings, new products and services, industry group leadership, institutional buying and the market’s direction to tell you if this is a stock to buy now. As always, valuation is in the eye of the beholder, so it’s subjective, but I don’t see this as a reason to buy the stock ahead of earnings. The key is going to be SG&A costs, which we can see above in relation to gross margins. Notice that since 2020, SG&A costs have actually been higher than gross margins, which is completely unsustainable for any business.
Shorts only control 9% of GME stock now, says S&P Global Market Intelligence, down from roughly 90% in early 2021. That’s still higher than the typical low single-digit short position, but nowhere near what it was. If you liked this idea, sign up for a no-obligation free trial of my Seeking Alpha Marketplace service, Timely Trader!
- Many investors who were in GME stock early clearly won big.
- And while the stock is down 68% from its January highs, but it’s still been an amazing run for GameStop (GME) investors.
- And it explains why GME stock carries a perfect 99 IBD Relative Strength Rating.
- However, we can value it using price-to-sales, and we’ll do that below to get a sense of what we’re dealing with.
It’s P/S ratio is currently 0.73, which is well down from its average in the past year, as we can see above. The logic there is that each dollar of sales is more valuable as margins rise, which would lead to a higher P/S ratio, all else equal. Shares of video game retailer and original meme stock GameStop Corp. are on pace to register their biggest daily percentage decline since early December. What I’m looking for in the report is a couple of things. First, revenue is obviously absolutely critical.
GameStop shares fall on revenue miss, company may use its cash to invest in stocks
The fact that this didn’t work surprises no one, but it does speak to what I view as desperation on the Board’s part of trying literally anything to generate revenue. Shares of GameStop Corp. rose 5.2% Monday, as the video-game retailer and original meme-stock darling resumed its recent rally. The first trading day of the New Year is setting up as https://www.forexbox.info/investment-banking/ a challenge to the Santa Rally theory, as stock index futures tilt south and bond yields rise. GameStop (GME) short interest has fallen, but does the electronics company still have profitability issues ahead of its earnings report? George Tsilis says that GameStop seems to be stabilizing financ… The stock market will be closed on Good Friday.
Shares of GameStop Corp. ended Monday’s session down 8.6%, with the stock registering its biggest daily percentage decline in two months. And yet, the stock’s finding of support at the 10-week line might make it a highly speculative play for those who believe in the turnaround. It’s just all the more vital to not hold too much, and subject your portfolio to excessive risk. And it explains why GME stock carries a perfect 99 IBD Relative Strength Rating.
Revenue, too, is seen falling 4% to $5.8 billion. GameStop’s top line is benefiting from sales of high-demand next generation Xbox and PlayStation consoles this year. These products, https://www.day-trading.info/what-is-the-difference-between-data-and-2/ though, are sold at low profit margins. GameStop used to hold an important position in the video gaming industry. It was the spot to buy the latest video game consoles and games.
Financial Performance
It’s another weak quarter following years of decline. The company’s EPS growth rate started declining consistently in 2017 and turned into outright losses for fiscal 2021, which ended in January. Meanwhile, GME stock’s sales posted an 18% annualized drop in the past three years. The massive short interest that primed GME stock for a rally is fading. The stock rally helped GameStop retire its massive pile of debt.
You may roll your eyes and think that’s obvious, but for GameStop, it absolutely needs a strong top line performance to help its margin situation. This is not simply about a higher top line; it’s about operating is scalping futures a sustainable trading strategy leverage, and that’s what I’m watching. Investors were notified in December that GameStop is trying to become a mutual fund of sorts, noting it altered its investment policy to include any stock it wants to buy.
Stock brokers
To keep things simple, eight full positions of equal weight put us at 100% invested. It’s a number suggested by IBD Founder William J. O’Neil in his book «How To Make Money In Stocks.» That means a full position starts out at 12.5%. The stock is still up more than 700% this year.
Technical Analysis Of GME Stock
Coming into 2021, GME shares had lost a third of their value over the previous five years. Investors betting the stock would fall, the shorts, controlled GME stock shares in late 2019. That overly bearish bet set up a perfect environment for a massive short-squeeze rally. I’m keeping my sell rating for GameStop Corp. stock ahead of the upcoming report, as I simply see no reason to own this stock. If it goes up without me after the report, so be it; the risk of a further breakdown in the stock is greater than the risk of a renewed rally, in my view.