They are companies that pick up a following in internet chatrooms or social media and take off from there. “We expect that eventually GameStop stock price will come down and some people will lose money when that happens for sure,” he said. “And my fear is that they’ll view the stock market as being rigged and not being fair, and that they won’t invest in the stock market.”
“In one example, our experts have noted that despite all the store closures we’ve already seen, GameStop still likely has twice as many stores today than what is needed,” said Oh. After three years of falling https://forexhero.info/ revenue and consistent losses instead of profitability, GameStop has to do a lot of rebuilding. On the surface, the new initiatives align with changing consumer tastes, which has shifted toward e-commerce.
- GameStop was also a top trending symbol on Stocktwits, a social platform for investors and traders.
- Its surging stock price allowed management to raise enough cash to pay off all its long-term debt and have $1.78 billion in cash left over.
- You can quickly see where a stock is strong or weak, and with one click, you can view the underlying data and sector averages to perform your evaluation.
- Dillard’s is also a Very Bullish quant recommendation and has the highest level of short interest at 53%.
GameStop was one of the companies that loads of hedge funds (companies who do these bets) had bet on to lose a lot of value. “And the act of capitulation is basically to buy back their short position, which will even drive the stock higher.” In the end, there may be no way to prevent people from pushing a stock too high and potentially burning themselves.
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Last month, a Deutsche Bank survey of 430 retail investors found they planned to put 37%, on average, of any stimulus cheques directly into equities. This huge disconnect between GameStop’s stock price and how the company is actually axes broker doing has created one of the more bizarre moments in Wall Street’s over 200-year history. The frenzy for the troubled retailer’s stock has been a head-scratcher for the analysts who try to determine a company’s value.
He’s also written for Esquire magazine’s Dubious Achievements Awards. Biotechs figure prominently on the list, and certainly some of last year’s meme stock favorites continue to hang on. Just be forewarned that this list is for informational purposes only. GME, for example, has lost more than a quarter of its value so far in 2022.
EXPLAINER: Why GameStop’s stock surge is shaking Wall Street
What’s going on with GameStop’s stock doesn’t make sense to a lot of people. “In recent years elevated crowding, low turnover, and high concentration have been consistent patterns, boosting the risk that one fund’s unwind could snowball through the market,” Kostin wrote. “Nobody goes to WallStreetBets thinking that this is a safe place to spend money,” Reddit boss Steve Huffman recently told me. WallStreetBets is a great description of the group – investing in GameStop has become one collective gamble. “What makes this dangerous is that sophisticated investors are smart enough to know when to get out of the situation,” he said. “Everybody is looking at WallStreetBets now,” Americans for Financial Reform analyst Alexis Goldstein told me.
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Short interest can lead to a short squeeze, which has propelled several big GameStop moves in the past. Below is an example of how the quant factor grades and quant rankings are displayed. Meme stocks have taken the world by storm and many Meme stocks have high levels of short interest.
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If your bet was wrong and the price actually rises instead of falling, you’d lose money. This is a massively simplified explanation of something called shorting, or short selling – words you might’ve seen cropping up in your feeds in the last few days. “I’m actually hosting a meeting later this morning with top regulators at the SEC and the Commodity Futures Trading Commission, and also the Federal Reserve to discuss recent developments,” Yellen told ABC News’ Robin Roberts. “We really need to make sure that our financial markets are functioning properly, efficiently, and that investors are protected.”
Jan. 26, 2021: ‘GameStonk’ gets celeb backing from Elon Musk
Looks like the short squeeze really started to kick-in at the end of October. The stock is up 225% from our Very Bullish recommendation in May. A long-time financial journalist, Dan is a veteran of SmartMoney, MarketWatch, CBS MoneyWatch, InvestorPlace and DailyFinance. As a senior writer at AOL’s DailyFinance, Dan reported market news from the floor of the New York Stock Exchange and hosted a weekly video segment on equities. Going long on a stock with high short interest thinking you’re going to get rich off panic-buying by short sellers is an exceedingly dangerous idea. It’s at least as risky as shorting stocks with high short interest in the first place.
The risk is so significant that many traders will not carry the positions overnight and look to re-establish positions each morning. Consider using tools that help to ensure your portfolio contains investments that stand to increase over time. If you are not a Seeking Alpha Premium member, in order to use the Seeking Alpha Screens or Quant Grades, please feel free to Take the 14-day trial of Premium. The trial will open up the screens and tools to help you determine if they are useful towards your investment research. If the Quant grades, screens, and portfolio tools are not useful feel free to stick with the Seeking Alpha’s free site. The Quant Ratings and Factor Grades provide a springboard for further investigation.
Instead, Spatt said it may be better first to properly educate all these novice investors about the risks of bubbles and overzealous trading. When they buy stocks “on margin,” they’re using borrowed money, which can supercharge their gains and losses. With options, an investor can buy the right to buy the stock at a later date at a certain price. If the stock hits that target, investors can reap a bigger return than if they simply bought a share.
A big reason for that is how deeply hated GameStop’s stock was by hedge funds and other professional investors on Wall Street. In a note to clients, Goldman chief U.S. equity strategist David Kostin said there are still stocks with heavy bets built up against them from Wall Street investors who bet on stock’s decline by selling shares they don’t own. And many of these retail investors are looking at “meme” stocks such as GameStop. GameStop is likely moving higher as meme-stock and retail investors look for a big squeeze in what has been a depressed market. The stock hasn’t moved higher this week until today, so perhaps the new wallet offering is catching investor interest, although it’s likely more related to the buzz about short interest and the cost to borrow shares.
When a stock is very heavily shorted, a rise in its price can force short sellers to get out of their bets. To do that, they have to buy the stock, which pushes the stock even higher and can create a feedback loop. As GameStop’s short sellers have gotten squeezed this month, smaller and first-time investors have been egging each other on to to keep the momentum going. In a short sale, they borrow a share of GameStop and then sell it. Later, if the stock price does as they expect, they can buy the stock at a lower price and keep the difference.
GameStop shares plunged nearly 20% the next day, closing on Dec. 9 at $13.66 a share. In early December, GameStop reported that net sales plummeted in the third quarter of its fiscal year 2020, down more than 30% compared to the same time period in 2019. The retailer attributed this drop in sales to a number of reasons, including an “11% reduction in the store base.”