There has been quite a lot of buzz this week regarding an unexpected surge in stock of a particular gaming company, GameStop Corp as its shares have surged in price. Back in April, the video game retailer was trading at just $2.80 but on wednesday, it had suddenly hit $380. Reddit is now obsessed with it while Elon Musk also tweeted about people that are making a huge amount of money on just a single stock.
Why did GameStop stock go up?
The growing behavior is said to repeat yet again as Reddit posters are now already searching for the next company that they can pounce on. According to the story by Bloomberg, shares of BlackBerry, AMC Entertainment, Express, and Bed Bath & Beyond have also soared high as well.
According to Caligiuri Financial chief executive and founder Mike Caligiuri's statement, just because people read a particular Investopedia article as well as know what exactly is a short squeeze, there are already enough other people out there that have reportedly read the same article. This was his statement describing the recent phenomenon that happened behind GameStop's own performance just this week.
GME stock forecast
An article by Business Insider notes that BofA's own price target represents a potential 93% downside from Tuesday's surprising close. BofA now concedes that a really tight supply of shares is now driving gains and the high short interest that is combined with the strong retail investor enthusiasm could still continue to support the momentum in the company going forward.
GameStop's share price, according to BofA is said to imply that EBITDA that isn't quite likely. BofA stated this while maintaining skepticism of a possible turnaround plan. That particular turnaround plan has reportedly been spearheaded by the Chewy/com co-founder known as Ryan Cohen who had acquired a whopping 12.9% stake in the popular company just last year and even urged its own management team to start transforming into a specialized popular e-commerce gaming retailer.
Gamestop Wallstreet bets
GameStop was reportedly onboard with Cohen's own plan and even added him as well as two of his own associates to its official board of directors some time earlier this month. The company has also reportedly seen its own sales surge as high as 30% of its own total sales due to the pandemic. However, the Bank of America is apparently not buying into the turnaround plan made by Cohen.
BofA also explained that they currently see a higher mix to online as a particular negative for earnings. They stated that the more businesses that will shift from their in-store transactions, the more complicated it will be to be able to sell high margin collectibles and pre-owned merchandise which has accounted for about 46% of gross profit dollars back in 2019.
While the momentum could continue to move the share price upwards, ultimately GameStop's own earnings should still serve as a reminder that its very own valuation is extravagant, according to the note.
Related Article: GameStop Stock Projected to Hit $15B Soon All Thanks to Elon Musk's 'Gamestonk' Tweet!
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Written by Urian Buenconsejo
