What’s Behind the Latest GameStop Stock Surge and Will It Last?
Is it Jan. 2021 all over again for GameStop investors? One look at the retailer’s stock ticker and you might think so.
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From a 30-day low of roughly $78 on March 14, GameStop stock shares climbed to $94 by March 21, and then spiked to $142 on March 22 — increasing to $150 the following day after opening at $130. By mid-afternoon on March 23, it hovered in the mid-$140s, showing a 16.34% gain for the day. TheStreet.com pointed out that it gained “an astounding 55%-plus in only six trading sessions.”
So, what’s going on? And, more importantly, from an investor’s standpoint, why? It’s most likely not the Q4 earnings report released, which actually sent the stock tumbling 8% in after-hours trading after its release on March 18, said Daniel Martin of TheStreet’s Wall Street Memes.
The report was lackluster, at best, beating revenue projections by 2%, with $2.25% revenue growth, year over year. However, the gross margin dropped from 21.1% in 2020 to 16.8% for Q4 2022. TheStreet attributed “inflation, supply chain disruptions and inventory management” to the decline, although the GameStop management team offered no explanations.
In the face of a dip and then an unexplained rise in the stock price, experts say it’s likely another “meme attack” like the one that sent the stock climbing to more than $300 per share in June 2021. In Jan. and Feb. 2021, the stock climbed 1700% in one week, largely thanks to the efforts of a group of Redditors on the subgroup r/WallStreetBets.
Compared to the millions retail investors won (and lost) last year, the gains of roughly 100% this week may seem like playing small. But is it the start of something much bigger?
ApeWisdom.io, which tracks the top stocks on Reddit, has GameStop listed as the top stock, with 3,005 mentions in the past 24 hours.
The fundamentals, however, still aren’t great. The PowerUp Rewards membership has continued to grow at 30% or more, and GameStop has other initiatives that could pan out to be profitable, TheStreet.com claimed.
But whether or not it’s going to grow into a solid short-term investment really depends on if retail investors decide to hold.
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Investors should exercise caution with any meme stocks not showing solid fundamentals, but short-term investors watching the market closely may still be able to profit off GameStop, even if it’s set to close down slightly for the day on Wednesday.
