Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money

73% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

  • Updates

GameStop Mania Is Finally Coming To An End Following Poor Earnings

Following the crazy quarter that GameStop (NYSE: GME) just had, many fresh-faced investors appear to be shocked at the pretty poor results on display at the company’s Q4 earnings call. 

This article was originally written by MyWallSt. Read more market-beating insights from the MyWallSt team here.

Perhaps this misunderstanding presents a valuable lesson for investors?

 

What’s up with GameStop?

COVID-19 hasn’t been kind to GameStop: stores closed, staff were laid off, sales declined. With that came an adjusted net loss of $138.8 million for fiscal year 2020, down from an adjusted profit of $19.1 million the prior year, while net sales declined 21% to $5.09 billion.

There was a glimmer of hope in the company’s pivot to online sales, which increased 175% and represented 34% of net sales in the fiscal 2020 fourth quarter versus 12% of net sales in the fiscal 2019 fourth quarter.

However, let’s not kid ourselves anymore, this is a company in decline — even if its share price is up almost 600% year-to-date.

The short-squeeze that occurred in January was one of those once-in-a-blue-moon events, and is unlikely to happen again by the looks of things: Short interest in GameStop Corp as a percentage of the company’s float has declined to an estimated 15% as of Wednesday, versus a peak of 141% the first week of 2021.

In short (forgive the pun): there are no shorts to squeeze anymore. 

So, the company’s price will now start to rise and fall on its fundamentals, which are not strong.  

  • Sales are declining. 
  • Debt is growing. 
  • It has not adapted quickly enough to changing market trends (i.e. e-commerce).
  • It is not exactly boasting an all-star leadership team. 

We are seeing the beginning of the end of the mania around GameStop, and if investors want to learn the right way to invest, then they should consider the 6 Golden Rules.

 

MyWallSt gives you access to over 100 market-beating stock picks and the research to back them up. Our analyst team posts daily insights, subscriber-only podcasts, and the headlines that move the market. Start your free trial now!

 

Disclaimer Past performance is not a reliable indicator of future results.

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.

CMC Markets does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and CMC Markets shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.

*Tax treatment depends on individual circumstances and can change or may differ in a jurisdiction other than the UK.

Continue reading for FREE

  • Includes free newsletter updates, unsubscribe anytime. Privacy policy

Free ebook

Tricks of the trade: 7 interviews with the world’s top traders

Get it now

Related articles