2024-06-17 07:21:13 ET
Summary
- GameStop experienced an upward surge in the share price lately, fueled by speculation about another short squeeze.
- GameStop's shares remain highly shorted. However, the real problem is the company's weak underlying business performance.
- The retailer's revenue and net income are declining.
- GameStop's valuation is indefensible at 3.0X revenues. FOMO-driven buying exposes investors to significant correction risks.
GameStop ( GME ) has taken investors on a wild ride since May, as new speculation about a new short squeeze (and FOMO) caused shares to soar to a new 1-year high of $64.83. Hopes for a short squeeze were driven by Keith Gill, also known as Roaring Kitty, who disclosed last week that he was now holding approximately 9M shares of the video game retailer. Roaring Kitty’s recent disclosures have caused new interest in the flailing video game retailer, but the company’s performance is far from great... and continues to disintegrate. GameStop continued to see an eroding revenue base in the first quarter and lost a ton of money in its operations as well, and recently the company issued new shares to take advantage of the share price increase, creating dilution headwinds for shareholders. The valuation is also decoupled from the firm’s underlying business reality, in my opinion, and the risk profile remains heavily skewed to the downside!...
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GameStop: Don't Fall Into The FOMO Trap