Shares of GameStop rose as much as 6% to $292 in afternoon trading on Tuesday as fast-money traders positioned themselves prior to the earnings release. GameStop was among the top five most commented stocks on social media, according to data from social monitoring service HypeEquity. Talk on social media of call options on GameStop — or a bet on the stock rising in the short-term — outpaced chatter of put options by a five-to-one ratio.
HypeEquity data shows traders keen on pushing GameStop's stock above $300 before earnings hit the tape.
Over on SwaggyStocks, another social media tracking platform, GameStop's stock was the fourth most commented on ticker on Reddit's WallStreetBets page. Positive mentions on the stock outnumbered negative mentions by six times.
It's clear meme traders continue to overlook the present fundamental state of GameStop (which is bad). Instead they appear to be staying true to large shareholder and soon-to-be chairman Ryan Cohen (aka Chewy co-founder) outlining some form of revitalization plan for the chain in 2021.
Speaking to GameStop's fundamentals, here is what Wall Street expects from the retailer in the first quarter. Note that the Bloomberg compiled consensus estimates only reflect projections from three analysts. Most sell-side analysts have dropped coverage of GameStop given the heightened volatility of its stock during the meme army's uprising.
Net Sales: $1.17 billion, up 14.6% from a year ago
Adjusted Operating Profits: loss of $67 million vs. a loss of $98.8 million a year ago
Adjusted Diluted EPS: loss of 71 cents vs. loss of $1.61 a year ago
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One of those analysts that recently pulled coverage on GameStop owing to insane levels of volatility is Bank of America's Curtis Nagle.
“Non-fundamental factors are still driving GameStop shares,” Nagle said in a research note to clients.
But that didn't stop Nagle from reiterating a final fundamental view on GameStop that perhaps the meme stock army may want to at least consider.
“We rate GameStop underperform given our belief that multiple structural headwinds centered around digital disintermediation will continue to weigh on earnings and cash flow. GameStop currently has a significant cash position which we expect to be used to pay down debt and repurchase shares. However, with the risk that free cash turns negative over the next few years, earnings support from capital return will ultimately fade and likely be overwhelmed by persistently declining operating earnings,” Nagle said.
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