The stock is up 225% from our Very Bullish recommendation in May. Tom Yeung is a market analyst and portfolio manager of the Omnia Portfolio, the highest-tier subscription at InvestorPlace. He is the former editor of Tom Yeung’s Profit & Protection, a free e-letter about investing to profit in good times and protecting gains during the bad. And, the theory goes, many retail investors used their cheques to invest in the stock market. The stock hasn’t moved higher this week until today, so perhaps the new wallet offering is catching investor interest, although it’s likely more related to the buzz about short interest and the cost to borrow shares.
Short interest can lead to a short squeeze, which has propelled several big GameStop moves in the past. Investors should also be concerned about the market’s low expectations for GameStop. The company’s losses are projected to increase at https://www.investorynews.com/ an alarming annual rate of 48% over the next five years. Its median price target of $110 on Wall Street points toward a drop in the stock price. All told, GameStop looks like a stock-split play that investors may want to avoid.
Historically, short interest as a factor (an investment metric) has notoriously been an inferior metric for forecasting stock price predictability. Nevertheless, a short squeeze has the capability to cause powerful stock rallies. Believing GameStop overpriced, hedge funds had “shorted” the company, betting the share price would fall.
IS IT JUST GAMESTOP SWEPT UP IN THIS?
Last year’s meme stock trading frenzy might have come to an abrupt end in 2022, but the market remains rife with high-short-interest stocks that could be ripe for a short squeeze. Today, it looks like interest in the stock on social media is building, as short interest has risen to the highest it’s been in more than a year, according to analytics company Ortex. The number of shares being shorted on GameStop is about 26.4% of the free float. The rising short interest has also significantly increased the cost to borrow shares, which is typically done in the practice of short-selling.
The Roundhill Meme ETF (MEME, $11.93) is off 15% for the year-to-date. Hardware and accessory sales accounted for 49% of GameStop’s top line last quarter. Meanwhile, GameStop’s adjusted net loss shot up to $158 million, or $2.08 per share, in fiscal Q1 from $29.4 https://www.currency-trading.org/ million, or $0.45 per share, in the prior-year period. Of course, the company is trying to diversify its business by moving into new verticals such as a digital wallet that will allow gamers to receive and send non-fungible tokens (NFTs) and cryptocurrencies.
- Critics used to dismiss the moonshots for GameStop and others as a sideshow, saying the excess was confined to a few corners of the market.
- The short Interest data metric as an investment factor has been the flavor of the year.
- Later, if the stock price does as they expect, they can buy the stock at a lower price and keep the difference.
- But it has really clamped down on pricey high-short-interest meme stocks from last year.
The short Interest data metric as an investment factor has been the flavor of the year. Historically, it is a pretty poor factor for forecasting long-term performance. After all, most investors short stocks because it is perceived they have poor investment fundamentals. But during a market cycle of short squeezes, it is a highly coveted data point. For over a year, interest in this data point has run strong and speculator’s enthusiasm does not seem to be slowing. They rose to the public eye because of social media platforms like Reddit and Wall Street Bets.
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Again, short interest has not worked as a consistent strategy in past decades, but it has worked for the last 18 months. If you like short interest and want to make it work, consider using our Top Short Squeeze Stock screen. And they know a lot of the money going in is from amateur investors.
Instead, investors should closely scrutinize what the company’s future may look like. Investing in stocks, whether long or short positions with a high level of short interest, is extremely risky. The risk is so significant that many traders will not carry the positions overnight and look to re-establish positions each morning. Consider using tools that help to ensure your portfolio contains investments that stand to increase over time. If you are not a Seeking Alpha Premium member, in order to use the Seeking Alpha Screens or Quant Grades, please feel free to Take the 14-day trial of Premium.
This is an explosive combination and we have found the screen has generated recommendations that have performed very well. In GameStop’s case, activist investor Ryan Cohen promised a corporate overhaul to refocus the retailer on e-commerce and other non-mall-based activities. https://www.forex-world.net/ For a brief moment, it seemed as if GameStop could relive its glory days of growth… whether in Web3 gaming or non-fungible tokens (NFTs). And as for Troika, the Converge merger would turn negative profits into positive ones as soon as merger costs flowed through.
Why Shares of GameStop Are Surging Today
Troika Media Group is an acquisitions company that can trace its roots back to Roomlinx, a Nevada-based firm founded in 1998. Over the years, the entity would purchase everything from broadband companies to brand consultancies. It wasn’t particularly successful; the firm averaged a $9.4 million loss per year and required a steady stream of stock and debt issuances to fill the gap. And that, in turn, is having a real-world effect on the share price right now. And that pretty meagre announcement generated a load of buzz on WallStreetBets – which in turn, foot pumped the share price.
What’s going on with GameStop’s stock doesn’t make sense to a lot of people. To fund the $125 million acquisition, Troika turned to Blue Torch Capital, a direct lender specializing in micro-cap companies. For investors unfamiliar with Troika and TRKA stock, here’s a quick summary.
Biotechs figure prominently on the list, and certainly some of last year’s meme stock favorites continue to hang on. Just be forewarned that this list is for informational purposes only. GME, for example, has lost more than a quarter of its value so far in 2022. Shares in Robinhood Markets (HOOD, $14.40), whose free app became ground zero for meme-stock trading volume, have slumped almost 20%.
In a short sale, they borrow a share of GameStop and then sell it. Later, if the stock price does as they expect, they can buy the stock at a lower price and keep the difference. GameStop is one of the most heavily shorted stocks on Wall Street. Below is an example of how the quant factor grades and quant rankings are displayed. Meme stocks have taken the world by storm and many Meme stocks have high levels of short interest. Stocks with high levels of short interest are susceptible to short-term price swings.
In an effort to capture this data, Seeking Alpha’s quant model’s algo is updated daily, ensuring we do not miss when the short interest data is reported. Updating our model daily also ensures that all of the quant data is near real-time. The ad tech firm currently trades for a roughly $100 million market capitalization, valuing its shares at about 0.3X price-to-sales (P/S). That’s the same as GameStop’s valuation immediately before its short squeeze and about eight times lower than the average U.S. firm. In other words, it’s a siren’s call for deep-value investors looking for enormous returns. Dillard’s is also a Very Bullish quant recommendation and has the highest level of short interest at 53%.