Is GameStop (GME) Hype Losing its Luster or Fueling Another Rally

Gamestop Still remains a WallStreetBets Talking point.

GameStop Corp. ​​GME ​shares rapid price increase is largely a result of talks where the stock mentioned in the ​WallStreetBets​ Reddit group attracted massive media attention and retail investor interest.

GME investor and trader Rod Alzmann spoke with Benzinga’s Luke Jacobi his team of analysts from began reporting a bullish thesis and research on the stock in mid-January, before the stock rising above $300.

GME is a consumer electronics and services retailer for video games. The business operates across Europe, Canada, Australia, and the United States. GME offers new and second-hand video game hardware, physical and digital video game software, and video game accessories.

GameStop shares has a 52-week high of $483 and a 52-week low of $2.57. Despite this trend others report shares of GameStop to remain “very detached from fundamentals” and the latest data from NPD isn’t offering any support for the ​stock​.

The Analyst & Thesis

Curtis Nagle remains unconvinced as well with an Underperform rating on ​GameStop’s stock​ with a $10 price target. ​Data from NPD reports that the total number of physical game units sold for ​new Xbox and PlayStation consoles ​are “very underwhelming,” Nagle mentioned in a note. For every PS5 and Xbox Series X/S console sold since their launch, only 0.64 physical games were sold this past February.

While part of the underperformance may be attributed to the lack of any new major game release for February and March, Nagle said in part this is due to the poor physical game sales, which could be attributed to rising digital penetration. Video game maker Electronic Arts Inc. ​​EA 0.65% ​recently acknowledged this reality in its conference call when it said digital accounted for 62% of sales.

Meanwhile, GameStop’s surge is partly attributed to rising expectations for GameStop increasing its digital business model led by Ryan Cohen. How GameStop can find relevance in the online video game market is somewhat unclear.

“While Cohen no doubt brings much-needed expertise to GME’s go-forward strategy, we still do not see how it addresses the issue of GME’s software businesses migrating to online networks where GME plays an extremely limited role as an intermediary,” the analyst told.

Jay Lorrence
Jay Lorrence

Investor of 12 years and Managing Editor of Money Midnight, a news outlet focused on highly profitable investment ideas and bold underground research.

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