Do the fundamentals really matter when discussing the GameStop share price? There has been a huge amount of volatility around the retailer’s stock since the middle of January, as Reddit group WallStreetBets made sending GameStop "to the moon" its mission.
That mission didn’t fail. The GameStop share price, which sat below $18 in early January, rocketed to $480 by the end of that month. It’s been a rollercoaster since, and as the retailer gets set to release its latest numbers, could its raised profile help GameStop out of trouble?
GameStop share price rides Reddit rollercoaster
In January, GameStop seemed to be heading the way of Blockbuster Video, just another high street retailer that fell by the digital wayside. The GameStop share price hadn’t broken over $30 in the five years before the Reddit interest began. But suddenly it became the centre of attention, and the GameStop share price started to skyrocket.
Along with other unfashionable stocks such as AMC Entertainment and BlackBerry, GameStop shares were snapped up as the WallStreetBets saga unfolded. Pitched in some quarters as a ‘David vs Goliath’ battle, day traders looked to squeeze shortsellers by bumping the GameStop share price. Unsurprisingly, short interest in GameStop has reduced markedly since, from just shy of 71.2m shares at the beginning of the year, to levels of under 15m now.
News coverage, documentaries and social media notoriety followed the saga, and the GameStop share price has been fluctuating since January, keeping investors and shareholders on their toes.
The GameStop share price has been up and down since the initial peak, and a month after hitting the $480 highs, it was trading at below $41 again. It has since risen to just below $350 again, and currently sits around $203.
Trouble looms despite moment in the spotlight
Away from the noise that has dominated the discourse around this company, GameStop has been struggling for some time. Sales have fallen as online game stores have eaten away at its market share. Quite simply, mall shopping isn’t anywhere near as profitable at a time when ordering games can be done at the click of a button and downloaded straight to your computer or console.
Before the increased publicity, GameStop was a tired brand, in desperate need of rejuvenating itself in the digital age. The writing seemed to be on the wall in 2019, as Sony pulled all its digital content from GameStop stores, stopping them from selling access codes to game downloads.
Online gaming started to overtake physical sales by as much as four to one, and even the gaming boom in the pandemic was no boost to the flagging store. GameStop has already closed hundreds of stores in response to this changing dynamic, with the Covid-19 pandemic accelerating this process. While all the free publicity over the last few weeks is likely to have boosted sales in the most recent quarter, the longer-term future still looks very uncertain.
GameStop releases its Q4 figures after the US market closes on Tuesday. Will the WallStreetBets saga have provided a boost to the figures?
Find your flow: four principles for trading in the zone
Learn about the four trading principles of preparation, psychology, strategy, and intuition, and gain key trading insights from some of the world's top investors.
Get this free report
Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.
