Video game retailer turned meme stock GameStop is considering investing in bitcoin and other cryptocurrencies, according to sources familiar with the matter. First, the company announced it was able to secure enough funding to keep it afloat for most of 2021, then some of the WallStreetBets traders noticed that shares were heavily shorted. Some of the more sophisticated WallStreetBets traders noticed that massive hedge funds had significant short positions in GameStop – and they were running out of time to cover those positions. More than four million people are in it, usually discussing stocks and shares and where they’re going to invest money. “The past 25 years have witnessed a number of sharp short squeezes in the U.S. equity market, but none as extreme as has occurred recently,” Kostin wrote in the note, published on January 29. “In the last three months, a basket containing the 50 Russell 3000 stocks with market caps above $1 billion and the largest short interest as a share of float has rallied by 98%.”
On Bluesky, the Game Informer account, which had not posted since July of last year, returned to life with a short video featuring the publication’s farewell message. At the bottom of the screen, code appears with the words “Continue” as though it were an arcade game asking if you wanted to put in more quarters to keep playing. The screen then flashes to black with a date, March 25th, suggesting a launch or announcement next week.
And that pretty meagre announcement generated a load of buzz on WallStreetBets – which in turn, foot pumped the share price. In the past month, I have been told multiple times hedge funds were too clever to allow this again. J Acquired Geeknet, Inc. (“ThinkGeek”), a United States–based online and wholesale Pop Culture retailer. G Acquired Simply Mac, Inc. (“Simply Mac”), a United States–based Apple specialty store retailer.
Some retail traders in search of the next GameStop stock set their sights on silver. During the first week of February, they pushed silver prices up about seven percent, but again, the increase was only temporary. As GameStock shares started trending downward, AMC Entertainment caught the eye of retail investors. Retail investors drove the steep incline through no-fee, no-commission apps like Robinhood. Small traders got excited about the stock through the WallStreetBets discussion group on Reddit, and the chatter rapidly spread through other social media platforms.
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- Still, the rally of heavily shorted stocks has taken place against a “backdrop of very low levels of aggregate short interest,” he added, though noted there could still be significant losses for hedge funds.
- With Q4 earnings just around the corner, volatility will likely play a role again.
- Small traders got excited about the stock through the WallStreetBets discussion group on Reddit, and the chatter rapidly spread through other social media platforms.
- Certainly, it could go up and generate impressive returns for investors, but there is no guarantee that it will.
- First, the company announced it was able to secure enough funding to keep it afloat for most of 2021, then some of the WallStreetBets traders noticed that shares were heavily shorted.
As a retailer that counts on sales of physical gaming items, the company has been the victim of hanging man candlestick declining sales across several business lines as the gaming sector transitions to more digital sales. The company has diversified into items like collectibles and trading cards, but many investors and analysts want to hear more on the company’s growth strategy. They are piling into stocks with high short interest – in other words, companies where many shares are being used to bet against the stock – with the intention of setting off a short squeeze. Even after the meme mania, GameStop stock remains a very difficult asset to understand. On one hand, valuations seem completely irrational, given the company’s breakeven margins and declining sales.
Since GameStop’s stock is heavily held by retail investors, it’s operating at breakeven. It has a significant cash balance; shorting the stock right now doesn’t seem reasonable, even if it makes sense from a valuation perspective. F Acquired Free Record Shop Norway AS (“Free Record Shop”), a Norway-based record store retailer operating 49 stores. @beltmenot Any magazine bank rolled by the largest video game retailer can be the most popular and longest running magazine.
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Troika Media Group is an acquisitions company that can trace its roots back to Roomlinx, a Nevada-based firm founded in 1998. Over the years, the entity would purchase everything from broadband companies to brand consultancies. It wasn’t particularly successful; the firm averaged a $9.4 million loss per year and required a steady stream of stock and debt issuances to fill the gap. Meme stocks tend to prompt consternation and confusion among normie market participants, but then that’s just part of the fun. While it’s technically true that meme stocks offer the remote possibility of earning penny-stock-like returns, they mostly seem to function as a source of nihilistic belly laughs for a select community of day traders. Although GameStop’s management team is known for providing minimal information with each earnings report, one of the few clear goals they’ve set is achieving profitability, primarily through super lean and frugal operations.
CEO Matt Furlong is refreshingly straightforward about GameStop’s prospects. My initial assessment of Troika assumed that the firm would act in good faith to keep investors updated about its outsized Series E deal. A Schedule 13D or 8-K filing should have notified shareholders of any significant exercise, since the dilutive effect would be 1) a material event, 2) a 5% or more change in ownership, or 3) both.
Based on analysts’ projections for the next three years, GameStop’s revenue is expected to shrink at a CAGR of -7%. Without any new ventures beyond its declining core business, I find it hard to believe that GameStop’s operating margins will improve beyond breakeven. I estimate margins will stay at around 0.1%, which aligns with current levels. With a long-term growth rate of 2.5% and discounting cash flows at 7.5%, GameStop’s equity value would come out to around just2trade review $6 billion, significantly lower than its current market cap of over $10 billion. Last month, a Deutsche Bank survey, external of 430 retail investors found they planned to put 37%, on average, of any stimulus cheques directly into equities.
One thing that’s pretty clear so far is that a decent helping of the original Game Informer staff seem to be back on board. Former online content director Brian Shea posted a tease of his own on BlueSky, as did Marcus Stewart, Alex Van Aken, Wesley LeBlanc and more. With Q4 earnings just around the corner, volatility will likely play a role again. However, since there’s no clear indication of how the volatility will unfold, I believe it’s better to avoid GameStop stock for now. Any potential new ventures the management team explores—like Bitcoin, for instance—are highly speculative. Rationally, they shouldn’t be the main reason for holding a long position in the stock.
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Although the company doesn’t provide any official guidance, estimates suggest that Q4 could mark the third consecutive profitable quarter, in line with the company’s goal of reaching breakeven. On the other hand, top-line losses are expected to continue, which shouldn’t surprise anyone at this point. And many of these retail investors are looking at “meme” stocks such as GameStop. And, the theory goes, many retail investors used their cheques to invest in the stock market. There has been a lot of interest in the stock market this week after investors from the Reddit message board managed to give shares in GameStop a huge boost.
What the Charts and Options Are Showing for GameStop Stock
- And many of these retail investors are looking at “meme” stocks such as GameStop.
- In March 2023, GameStop decided to leave Ireland after another loss making year accumulated its losses to €45.5 million.
- Without any new ventures beyond its declining core business, I find it hard to believe that GameStop’s operating margins will improve beyond breakeven.
- However, it’s certainly worth tracking these strong meme prospects that hold plenty of potential to pop in the year ahead.
- GameStop’s Australian division has been focused on increasing higher-margin merchandise and opening more large format hybrid stores which include both an EB Games and Zing Pop Culture store in a single location.
Recently, the stock has slumped gig stocks due to compounding factors, including online gaming, excessive overheads, and greater competition. Despite GameStop’s sales decline, the company has a relatively strong balance sheet—thanks to stock dilution—and an extra cushion from short sellers since the company operating at breakeven is seen as somewhat stable. However, there are big expectations around whether CEO and major shareholder Ryan Cohen will use some of the company’s $4.5 billion cash horde to implement a turnaround story and reignite revenue growth.
To fund the $125 million acquisition, Troika turned to Blue Torch Capital, a direct lender specializing in micro-cap companies. For investors unfamiliar with Troika and TRKA stock, here’s a quick summary.
That’s roughly the same as GameStop’s elevated 88% figure in January 2021. Both firms would go on to experience short squeezes in their stock, an essential ingredient to getting retail investors excited. To their credit, social media investors have identified striking parallels between Troika Media and GameStop. And management at the two companies have engaged in startlingly similar financial restructuring plans. Last year, GameStop shut down Game Informer, laying off all its staff and putting an end to one of the last remaining video game magazines still published in the United States. But now, cryptic posts on social media hint that the publication may make a return.
What has Reddit got to do with it?
WallStreetBets and its followers hoped to push the price up, forcing professionals to buy in at higher prices when closing out their short positions. GameStop got a boost from the influx of retail investors, but there was another phenomenon in play that created the extraordinary peak. “They seem hell-bent on taking on Wall Street, they seem to hate hedge funds and threads are peppered with insults about ‘boomer’ money.
However, they also pointed to the pre-owned games segment as a major part of its success.142143144 GameStop’s Australian division has been the only profitable segment of the global GameStop business for the 2020, 2021 and 2022 fiscal years. The company reported profits of US$9.4 million, US$52.2 million and US$30.6 million for each fiscal year respectively. As hedge funds bought GameStop shares to close out their short positions, the activity pushed the stock’s prices even higher. Everyone involved knew the high prices would be short-lived, and retail investors started looking for opportunities to repeat their GameStop success. The ad tech firm currently trades for a roughly $100 million market capitalization, valuing its shares at about 0.3X price-to-sales (P/S). That’s the same as GameStop’s valuation immediately before its short squeeze and about eight times lower than the average U.S. firm.
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E Acquired SFMI Micromania (“Micromania”), a France-based video game retailer operating 332 video game stores expanding GameStop’s operations into France. B Acquired Electronics Boutique Holdings Corp. (“EB Games”), a United States–based video games retailer operating approximately 2,300 stores expanding GameStop’s operations in/into Australia, Canada, Europe, New Zealand and the United States. A Acquired a majority interest in Gamesworld Group Limited (“Gamesworld”), an Ireland-based video game retailer operating 10 stores expanding GameStop’s operations into Ireland. In an effort to create another “short squeeze” and force prices up by making hedge funds pay premium prices on shorted shares, AMC was heavily promoted across social media platforms. Cohen, co-founder of Chewy, bought shares in GameStop in 2020 and joined the board in 2021 as GameStop became one of the key meme stocks in the trading mania. His e-commerce experience fueled hopes that he could help modernize the brick-and-mortar retailer, but the company is still struggling to adapt to changing spending habits by gamers.
