S&P 500   5,022.21
DOW   37,753.31
QQQ   425.84
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Checking in with 5 Bitcoin Stocks Ahead of Bitcoin's Halving
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Stock market today: Wall Street dips to send S&P 500 to its longest losing streak since January
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Prologis Stock Leading U.S. Logistics Boom
S&P 500   5,022.21
DOW   37,753.31
QQQ   425.84
ASML Fires Warning Shot For Tech Investors
Checking in with 5 Bitcoin Stocks Ahead of Bitcoin's Halving
Closing prices for crude oil, gold and other commodities
Lululemon’s P/E Is Back to 2017 Levels: Should You Buy the Dip?
Stock market today: Wall Street dips to send S&P 500 to its longest losing streak since January
Abbott Laboratories Outlook is Healthy: Buy the Dip
Prologis Stock Leading U.S. Logistics Boom
S&P 500   5,022.21
DOW   37,753.31
QQQ   425.84
ASML Fires Warning Shot For Tech Investors
Checking in with 5 Bitcoin Stocks Ahead of Bitcoin's Halving
Closing prices for crude oil, gold and other commodities
Lululemon’s P/E Is Back to 2017 Levels: Should You Buy the Dip?
Stock market today: Wall Street dips to send S&P 500 to its longest losing streak since January
Abbott Laboratories Outlook is Healthy: Buy the Dip
Prologis Stock Leading U.S. Logistics Boom
S&P 500   5,022.21
DOW   37,753.31
QQQ   425.84
ASML Fires Warning Shot For Tech Investors
Checking in with 5 Bitcoin Stocks Ahead of Bitcoin's Halving
Closing prices for crude oil, gold and other commodities
Lululemon’s P/E Is Back to 2017 Levels: Should You Buy the Dip?
Stock market today: Wall Street dips to send S&P 500 to its longest losing streak since January
Abbott Laboratories Outlook is Healthy: Buy the Dip
Prologis Stock Leading U.S. Logistics Boom

GameStop Shares Surge On Surprise Profit

GameStop stock price

Key Points

  • GameStop surged on surprise profits, but the bears are already capping gains. 
  • Results are good but driven by an unsustainable inventory reduction. 
  • Caution chasing this stock higher. 
  • 5 stocks we like better than GameStop

GameStop NYSE: GME is an interesting and exciting market to watch, but it is not a market for most investors to dabble with. The only thing that can be said is that volatility will reign supreme because the bulls and the bears have strong feelings about where its price should be. The analyst's support shows that average investors should avoid (except with specifically allocated speculation dollars). This stock doesn’t have any. The last to come out with any commentary was Wedbush and the end of last year, and they rate it as Reduce with a price target more than 75% below the newly elevated price action. 

Another is the short interest. The short interest is largely why the stock rose 50% at the open following the Q4 report, but they aren’t running scared, far from it. Fintel.io reports short interest was amazingly high at 21%, and the off-exchange short volume is well above 50%, showing a deep commitment level. The bulls may have advanced now, but they may not get much higher when the bears reposition, and it looks like they are doing that very thing right now.  

The institutions, you say? Yes, they bought an astounding $1 billion worth of the stock in Q4 but didn’t buy much in Q1. Their new holdings are still down or nearing break-even, with the shares up about 30%, and you have to ask yourself, what will they do now? Start buying again with the economy on the brink of collapse. That may be a stretch. Think about all the daily layoffs and how those will affect spending on games and intangibles like NFTs. GameStop had a good quarter, but how long can it last?

GameStop Posts Surprise Profit, Don’t Expect More 

GameStop posted a surprise profit in Q4, but the news isn’t great. The company’s revenue of $2.23 billion is down on a YOY basis, and profitability is 100% tied to a reduction in inventory. The inventory reduction is sound, but a 25% decline can’t be sustained long, and the company still have merchandise to sell. The alarming comparison is that the $232 million worth of inventory reduction offset a loss of $147.5 last year for a profit of $48.2 million. That’s a difference of only $195 million which means on an inventory-adjusted basis, this year's operating results worsened despite a 350 basis point improvement in SG&A expense. 


The good news is that GameStop still has about $1.4 billion in cash and very little debt. This should sustain operations for the next few years while the bulls and bears fight this thing to the death. Investors can sit back and watch the action between then and now while focusing on better bets. 

The Technical Outlook: GameStop Is In A Downtrend 

GameStop shares surged more than 50% at the open but are still down trending. The size of the opening surge is a testament to the volatile nature of the stock, as it only moved up to the 150-day EMA. This level has been a critical point of resistance and selling since the meme-stock correction took hold in 2021. The way it looks now, the short-sellers are out in force and capping gains at this level. Traders should expect downward pressure to build and keep this thing moving sideways, if not down to retest support near $16. 

Should you invest $1,000 in GameStop right now?

Before you consider GameStop, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and GameStop wasn't on the list.

While GameStop currently has a "Sell" rating among analysts, top-rated analysts believe these five stocks are better buys.

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
GameStop (GME)
1.1595 of 5 stars
$10.31-0.6%N/A515.76Sell$5.60
Compare These Stocks  Add These Stocks to My Watchlist 

Thomas Hughes

About Thomas Hughes

  • tmhughes.writeon@gmail.com

Contributing Author

Technical and Fundamental Analysis

Experience

Thomas Hughes has been a contributing writer for MarketBeat since 2019.

Areas of Expertise

Technical analysis, the S&P 500; retail, consumer, consumer staples, dividends, high-yield, small caps, technology, economic data, oil, cryptocurrencies

Education

Associate of Arts in Culinary Technology

Past Experience

Market watcher, trader and investor for numerous websites. Founded Passive Market Intelligence LLC to provide market research insights. 


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