GameStop fundamental analysis: Latest earnings This means that investors should not rely on this information to buy or sell GME stock, as the actual short interest percentage and other metrics may have changed. It is important to note that the latest data provided by MarketBeat is from 15 July. That said, it would be difficult to see the price rising to the levels seen in 2021, as the days-to-cover metric is significantly lower than it was back then, as is the percentage of shares sold short relative to GME’s public float. Moving forward, even though short interest is not anywhere near where it was back in January 2021, when it stood at over 140, of the stock’s public float, traders could still trigger a GME short squeeze, as short interest was standing at 19.6%, as of 15 July. The higher the days-to-cover metric is, the more difficult it will be for short sellers to cover their positions without affecting the price of the stock as their buying activity will tip market participants that large volumes of the stock are being demanded – a situation that typically triggers an increase in the price of the instrument. Currently, it would take short sellers a bit more than four days to fully cover their positions as per data from MarketBeat based on the average trading volumes of the stock. This uptick in short interest does not necessarily indicate that a GameStop short squeeze will occur but it does increase the odds of that happening. Since 15 July, the price of GME stock has risen almost 3%. Notably, this increase in short positions occurred only days before the company’s 4-for-1 stock split occurred. These traders are constantly monitoring the price action to act if there are indications that another GameStop short squeeze is taking place. However, the influence of retail traders on the price progressively faded, although the stock never got close to where it was before the squeeze.Īs a result of these events, GME is now considered a “meme stock” – a designation that indicates that the stock price could be highly influenced by the activities of retail traders. The price action continued to be highly volatile and multiple sharp upticks and downticks occurred during the first half of 2021. This fuelled a rally that pushed GME’s price to $120 a share (post-split). However, in January 2021, coordinated efforts from retail traders managed to push the price of GME stock to all-time highs as they squeezed short-sellers out of their positions by buying large amounts of stock and short-dated option contracts.īrokerage firms were forced to hedge their exposure to these contracts by buying GME stock in bulk. Short-sellers were expecting to see the company’s share price decline as the business deteriorated. The company managed to stay afloat by liquidating a large chunk of its inventory to stay cash flow positive. Sales kept declining in the 2021 fiscal year due to the pandemic. In addition, the pandemic affected the company’s operations as stores remained closed for months due to lockdowns.This put GameStop in a difficult position as its negative cash flows increased significantly.īy the end of February 2020, the company had cash and equivalents of roughly $500m but burned nearly $414.5m during that fiscal year (2019). GameStop has been on the radar of short sellers for a while as the company’s fundamentals have been deteriorating for years since most consumers turned to online channels to purchase video games. Try demo GameStop short squeeze explained: Why is this a possibility? US30 US Wall Street 30 (USA 30, Dow Jones)
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |