Should you invest in gamestop stock? (2024)

Is buying GameStop stock a good idea?

GameStop is down 70% from record highs but remains a high-risk bet for investors given its negative profit margins and falling revenue. One of the most traded stocks in the last year, GameStop (NYSE: GME), has taken investors on a roller-coaster ride.

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If you bought $1,000 worth of shares of GameStop in early January at $19.94 each, you would have seen a 446% return on your investment, and your $1,000 would now be worth $5,461.

GameStop's stock is substantially overvalued at current trading levels based on any reasonable assessment of business value.

Consensus from 4 of the American Specialty Retail analysts is that GameStop is on the verge of breakeven. They anticipate the company to incur a final loss in 2022, before generating positive profits of US$35m in 2023. So, the company is predicted to breakeven approximately 2 years from today.

However, according to financial experts, the insurgence comes as a shock after the 2022 early predictions for this company, as its current stock value far exceeds the company's real worth. Since March 1, GameStop's stock market value has ranged between $78 and $189.

GameStop's share price also went through a large drop in pricing. A short squeeze, one year after GME gained traction on WallStreetBets, is unlikely to happen. A growing focus on GameStop actual business performance indicates more downside potential.

After 10 years of adding the inflation-adjusted $1,000 a year, our hypothetical investor would have accumulated $16,187. Not enough to knock anybody's socks off. But after 20 years of this, the account would be worth $118,874.

GameStop shares skyrocketed in January as retail investors, urged on by popular Reddit forum WallStreetBets, bought the stock as a way to punish hedge funds that had taken an outsized short bet against it.

Is GameStop undervalued?

The Verdict: At today's price, GameStop stock appears to be extremely overvalued based on a sampling of common fundamental valuation metrics.

GME shares nearly doubled to over $300 in four weeks. Fundamentally, little more than a mixed-bag earnings report delivered last week justifies the March 2022 bullishness. It certainly “smells” like another meme-style move higher, which could still be great news for GME investors.

As of today (2022-05-14), GameStop's Intrinsic Value: Projected FCF is $25.85. The stock price of GameStop is $98.39. Therefore, GameStop's Price-to-Intrinsic-Value-Projected-FCF of today is 3.8. During the past 13 years, the highest Price-to-Intrinsic-Value-Projected-FCF of GameStop was 8.59.

GameStop surprised Wall Street with a net loss of $147.5 million in the fourth quarter of 2021, but the retailer said that's all part of its transformational game plan.

How much a company is worth is typically represented by its market capitalization, or the current stock price multiplied by the number of shares outstanding. GameStop net worth as of May 13, 2022 is $7.51B.

GME announced its next quarterly earnings report on March 21, 2022. Analysts predicted $0.78 earnings per share (EPS), with year-over-year EPS growth of -$1.77 in 2022 and -$0.82 in 2023. For the two years, these values reflect EPS increases of 17.30% and 53.70%, respectively.

We believe these actions better optimize our capital structure and demonstrate our continued commitment to delivering value to our shareholders.” The Board declared a quarterly cash dividend of $0.38 per common share payable on March 29, 2019 to shareholders of record as of the close of business on March 15 , 2019.

GameStop (NYSE:GME) stock is up more than 7% today after investors learned that company chairman Ryan Cohen bought an additional 100,000 shares of the video game retailer. This takes his stake in the company to nearly 12%.

Melvin had been betting against GameStop since 2014. It profited as the shift toward downloaded and streaming videogames caused the bricks-and-mortar retailer's stock to drop. The gaming industry had its best year in 2020, but GameStop lost $215.3 million, following a larger loss the prior year.

If you short a stock at $10, it can't go lower than zero, so you can't make more than $10 per share on the trade. But there's no ceiling on the stock. You can sell it at $10 and then be forced to buy it back at $20 … or $200 … or $2 million. There is no theoretical limit on how high a stock can go.

Is GameStop still over shorted?

GameStop stock's current short interest is 18.5%, according to Yahoo Finance, as 8.6 million shares are currently used by bears to express their pessimistic views. This is a substantial increase since the November 2021 update, when 6.8 million shares were being shorted.

The historical S&P average annualized returns have been 9.2%. So investing $1,000,000 in the stock market will get you $96,352 in interest in a year. This is enough to live on for most people.

Prediction: Value of $1 from 2021 to 2050

$1 in 2021 is equivalent in purchasing power to about $2.44 in 2050, an increase of $1.44 over 29 years. The dollar had an average inflation rate of 3.13% per year between 2021 and 2050, producing a cumulative price increase of 144.11%.

If you start with $100,000, at the end of 30 years, you'll end up with about $575,000 (not counting dividends).

The longer it takes for a trade to be settled, the likelihood increases that investors who have lost a lot of money in a market slump will not be able to pay for the trades. As a result there is a so-called stock ​three-day​ rule that requires security transactions to be settled within ​three business days​.

Can you make money on penny stocks? It is possible to make money with penny stocks. Then again, it's technically possible to make money with any type of stock. Successful investors usually focus on the potential for their stock picks, regardless of price, to gain value over the long term.

To be sure, dollar-cost averaging has some major advantages. It helps take emotion out of your investment strategy and lowers the risk of buying while a stock is too expensive. By investing equal dollar amounts, you'll buy fewer shares when the stock is expensive and more when it's cheaper.

Trading is often viewed as a high barrier-to-entry profession, but as long as you have both ambition and patience, you can trade for a living (even with little to no money). Trading can become a full-time career opportunity, a part-time opportunity, or just a way to generate supplemental income.

Does GameStop bounce back?

Analysts expect a rebound from COVID headwinds in 2022, projecting 17% revenue growth. However, 2023 estimates call for little change or even a slight decline in revenue, signaling that GameStop's recovery could be short-lived.

GameStop Stores Are Closing

At the end of 2020, GameStop announced that they planned to close 1,000 stores by March of 2021.

In late January, a band of Reddit-obsessed retail traders coordinated trades on heavily shorted stocks, created a massive short squeeze in GameStop, whose shares surged 400% at one point.

AMC Entertainment Shorts Are Now in Trouble as the Demand for Call Options Is Currently the Highest Since June 2021, Increasing the Prospects for a Gamma Squeeze.

The gaming retailer says it's transitioning to become a more general technology company. GameStop has laid out its future ambitions, and it's not all about selling video games. The retailer said as part of its latest earnings release that it is taking steps to evolve to become a more general technology company.

GameStop relies heavily on trade-ins. About 46% profit on each preowned game they sell. With less physical games being bought, there are less trades being made. This method of business seems doomed to fail in the rising digital age.

Generated net sales of $6.011 billion for the fiscal year, compared to $5.090 billion for fiscal year 2020.

GameStop Corp. (NYSE:GME) delivered a -36.52% return since the beginning of the year, while its 12-month returns are down by -48.17%. The stock closed at $94.20 per share on March 21, 2022.

The Ape Buzz Continues

Since GameStop investors kicked off the meme stock frenzy in early 2021, share prices have remained sky high. That's because the GameStop "apes" — as members of meme stocks' cult-like followings are called — are stubbornly holding onto the stock.

NYSE: GME. GAMESTOP CORP Stock Dividend Yield & Dates

No, GME has not paid a dividend within the past 12 months. What is GAMESTOP's Dividend Payment Date? GAMESTOP (NYSE: GME) does not pay a dividend.