While GameStop (NYSE: GME) took the world by storm and was on a ‘short squeeze’ journey in January 2021, it is now, like all other assets, facing inflation, interest rate hikes, and macro headwinds, which are affecting investor confidence.
In the second quarter of 2021, the firm capitalized on the short squeeze rally and raised $1.1 billion, which helped save the firm, but in 2022 the balance sheet resilience of GameStop is deteriorating quarter after quarter.
Analysts expect the firm’s revenue and earnings per share to decline in Q4 to $1.39 billion and -$0.39, respectively, with more of the same to come in 2023. Despite a strong start to Q4 earnings by financials, the fundamentals will be the investor’s focus as inflation is proving sticky, and the Federal Reserve (Fed) is looking to push rates higher.
GME chart and analysis
In the last month, GME has been trading in the $23.91 to $27.82 range, with 80% of all stocks performing better. Currently, the price action is in the lower part of its 52-week range, staying below all daily moving averages. Technical analysis indicates a support line at $24.04 and a resistance line at $24.77.
Wall Street analysts rate the stock a ‘moderate sell,’ with the average price in the next 12 months reaching $26.00, 5.95% higher than the current trading price of $24.54. Notably, out of the two Wall Street analysts covering the stock, one has a ‘hold’ rating and the other a ‘sell’ rating.
Currently, fundamentals for stocks seem bad; however, over the past two years, GME rarely traded on fundamentals.
Long-term investors should look elsewhere to put their money; on the other hand, a stock that still occupies Reddit boards could potentially see another run but the risk appetite for participating in a potential GME rally needs to be extremely high.
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