To summarize what’s happening on the market, big-time hedge funds are short-selling GameStop. That means they’re betting its stock price will drop and they’ll make money later on. But on the other side, a mass of amateur internet investors is buying GameStop stock, causing its stock price to soar.
Full Answer
Should you Buy GameStop stock?
Ranging from #1 (Strong Buy ... with #1 stocks returning an average of +25% annually since 1988. Over the past month, the Zacks Consensus EPS estimate remained stagnant. GameStop is currently sporting a Zacks Rank of #3 (Hold). Investors should also ...
What really happened with GameStop?
Over the years, GameStop has changed hands a few times including being acquired by the bookstore chain, Barnes and Noble. GameStop became its own independent company in 2002 when it went public with Barnes and Noble retaining a majority stake. This continued until 2004 when Barnes and Noble distributed GameStop’s shares to its own shareholders.
Could GameStop stock supercharge your portfolio?
Regardless of where you invest, though, there are a few common mistakes that could hurt your earning potential in 2022. When the stock market ... very good chance your portfolio will recover ...
What exactly happened with GameStop?
If you need a quick tl;dr for all of this:
- Short sellers sell stocks they don’t own by borrowing them from a shareholder
- They sell them high and hope to buy them back lower so they can make a profit when they return the shares to the original owner
- The subreddit Wall Street Bets saw this activity and decided to dogpile onto Game Stop stock, driving the price up hundreds of dollars
Why is GameStop stock going down?
The consumer electronics industry was pinched by supply chain shortages, the rise of the omicron variant of COVID-19, and declining demand for products in the video game niche compared to a year earlier. Each of those challenges likely affected GameStop over the holiday selling period, too.
Why has GameStop stock gone up so much?
Why Did GME Stock Go Up? Shares of GME stock surged 1,600% in January. Individual investors coordinated a buying spree in the video game retailer's shares using online message boards. The buying surge caught the "shorts" who were betting the stock would fall off guard.
What is the GameStop stock controversy?
Popular investing app Robinhood became the focus of the controversy after it decided to freeze trades for GameStop on Jan. 28. Shares of the video game retailer spiked after traders on Reddit began frantically buying the company's stock. GameStop shares have since came crashing down only to shoot up once again.
What happened with GameStop stock in simple terms?
Amid the first COVID-19 lockdown in March 2020, GameStop stock dropped to a value of $2 to $4 per share, the lowest in the company's history. Much of this was due to GameStop stores being closed. The low value of GameStop's stock gave birth to an idea to manipulate the stock market.
Should I sell GameStop stock now?
There are currently 2 sell ratings for the stock. The consensus among Wall Street equities research analysts is that investors should "sell" GameStop stock. View analyst ratings for GameStop or view top-rated stocks.
Is it smart to invest in GameStop?
Gamestop (GME) stock is likely to decline after the current overheated rally. The stock can still be profitable in the long term if revenue growth stays consistent. But investors should avoid buying GME stock due to the high short-term risk.
Is it legal for Robinhood to restrict trading?
And Robinhood's user agreement clearly states it “may at any time, in its sole discretion and without prior notice to [users], prohibit or restrict [users] ability to trade securities.” While some users are likely to be mad as a result of the sudden restrictions, the user agreement clearly states that Robinhood was ...
Did Robinhood get in trouble for GameStop?
A federal judge on Wednesday dismissed a lawsuit against Robinhood that had accused the company of colluding with Citadel Securities to limit trading of GameStop and other meme stocks in January. Investors had sued Robinhood alleging they lost money when they couldn't trade out of GameStop and other stocks.
How much did short sellers lose on GameStop?
GameStop Short Sellers Lose $200 Million In August Extending Their Losses As Shorted Shares Continue To Drop.
What did GameStop do with the money?
The company erased its long-term debt, paying off everything "other than a $47.5 million low-interest loan associated with the French government's pandemic response." While not enough on its own to reverse GameStop's loss of sales over time, freedom from debt will likely be a meaningful benefit to the company going ...
Is GameStop going out of business?
GameStop Stores Are Closing At the end of 2020, GameStop announced that they planned to close 1,000 stores by March of 2021.
Did GameStop stock crash?
GameStop Crash Wipes Out $5 Billion In Market Value, But One Market Expert Says Shares Could Skyrocket Again. A problem occurred.
August 2020 – GameStop gets a new dad
Chewy founder Ryan Cohen rocks up on the Wall Street scene, takes a look at GameStop’s average stock price of around $10 and says “I’ll have some of that”.
Something goes wrong
Enter Wallstreetbets. A trading and investing subreddit, ya boys on the forum had noticed for a while now that something was not right on Wall Street. After all, how could hedge fund bastards ( great write-up here on why they’re a greedy waste of blood and oxygen on two legs) borrow more shares than were actually available?
The buying frenzy begins
Wallstreetbets members then started buying as much GameStop stock as they could get their hands on, which result in the value of those stocks being driven up. It’s worth pointing out that these were all just average people, earning average salaries, taking part in this.
They did something incredibly stupid
Thinking that they were playing a game of chicken with Wallstreetbets, hedge fund investors doubled down and borrowed more stock, thinking that they could cause a crash in the stock price and save their greasy skins.
It just keeps going up
At the time of writing, GameStop’s stock currently sits at $193 per share, which isn’t too bad for anyone who bought in back when it was valued at $4 a pop. Hedge funds are still trying to short GameStop, and they’ve gone onto major news channels in an effort to shift blame while angrily yelling about being beaten at their own game.
When will it end?
Who knows? A paradigm shift is unfolding right now on Wall Street, and the tears from bitter hedge funds are delicious. Comeuppance has long been overdue, sales of incredibly tiny violins are up, and when the dust has settled you can expect hedge funds to have lost a billions in dollars in the process.
Gamestop stock price – what the hell is going on?
I regularly have podcasts and produce videos which look at news stories from around the world, where I analyse them and look at the wider picture.
Tears and headaches
In another surprise twist, the unprecedented rally was given a further boost by Elon Musk.
What is a gamestop?
GameStop is a retail and eCommerce company that specializes in video games, video game consoles, and assorted accessories. At one point GameStop had more than 7,000 brick and mortar locations in 14 countries. It is a store that is unique in that, while it sells new games and consoles, it would also purchase and resell used games and consoles. With the rise of eCommerce and the oversaturation of Gamestop locations, the company has closed more than 1,000 stores in the past year. Gamestop has had a number of difficult years since 2016 culminating in the management team announcing a pivot toward a digital-first approach while decreasing the numbers of brick and mortar locations.. This pivot and transformation has been looked at skeptically by many investors (up until the last couple of weeks). Their specific niche online has a ton of competition such as Amazon.
What does it mean to short a stock?
Short selling is a controversial topic. It means you can sell a stock you don’t own. If the stock goes up you lose money and must pay it to the owner of the stock, if the stock goes down, you get paid money by the owner of the stock. In order to sell a stock short, you must have an owner of that stock be willing to enter into the transaction with you. An owner of the stock is willing to lend their stock to a short seller because they will receive a fee for doing it, and if they have no intention of selling the stock it serves to juice their return by a couple of percent a year. Certain hedge funds ended up shorting the stock of GME simply because they didn’t believe the turnaround story and thought that the stock would go down or that it would underperform relative to other positions in their portfolios. The number of short shares in the market ended up being larger than the total number of shares outstanding in the marketplace (this is confusing but possible because the same actual share of stock can be bought, lent, and sold multiple times.)
What Is the True Value of GameStop Stock?
Clark says the larger issue for those pushing up the price of GameStop and other Reddit-fueled stocks is whether the shares are actually valuable. In other words, there should be a correlation between the stock’s price and the company’s real worth.
Final Thought
Investing can be overwhelming, especially in these unique circumstances. It’s important to remember Clark’s simple approach to saving and investing.
Why did Robinhood put limits on GameStop?
Robinhood claimed it was forced to impose buying limits on GameStop and other volatile stocks in order to comply with clearinghouse deposit requirements. Robinhood CEO Vlad Tenev said the brokerage "had to conform to our regulatory capital requirements.".
Is GameStop stock overvalued?
Financial pundits such as Jim Cramer have urged individual investors to take profits in GameStop in recent days. With its stock price still up more than 1,000% since the beginning of the year, many analysts see GameStop's shares as grossly overvalued.
Does Joe Tenebruso have a position in any of the stocks mentioned?
Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Prev. 1.
