10 Sep The Next GameStop: Stocks With The Potential For A Quantum Short Squeeze NASDAQ:CAR
Of course, because SMCI stock is a meme stock, the gains are amplified. As we saw with AMD, data center demand is soaring so the hardware needed for them will rise as well. The company introduced a new AI platform that customers are flocking to. But huge numbers of people in the wallstreetbets Reddit forum swapped tips and bought shares in GameStop. With fewer people out shopping due to the pandemic and most games being sold online, things weren’t looking great for the company.
- Last month, a Deutsche Bank survey of 430 retail investors found they planned to put 37%, on average, of any stimulus cheques directly into equities.
- The U.S. Securities and Exchange Commission on Jan. 29 issued a statement saying it is “closely monitoring and evaluating the extreme price volatility of certain stocks’ trading prices over the past several days.”
- As each barrier to trading has fallen, consumer advocates cheered the broadening playing field.
- Attal was the former chief marketing officer at Chewy, and oversaw its rapid expansion from three people to more than 10,000 employees.
In a July 27, 2020, YouTube video posted to his channel, Gill said, “Some people won’t even tune into the stream right now when they hear I’m bullish on GameStop, at the current price point it’s traded at about four bucks right now.” “We are excited to bring our customer-obsessed mindset and technology experience to GameStop and its strategic assets,” Cohen said in a statement at the time. Still, the company reported an operating loss of $63 million in the third quarter.
Last year’s meme stock trading frenzy might have come to an abrupt end in 2022, but the market remains rife with high-short-interest stocks that could be ripe for a short squeeze. While a lack of interest in looking at fundamentals still appears to be a guiding force, some companies that are considered meme stocks today do possess good fundamentals. The following three meme stocks are companies that shouldn’t be ignored. The videogame retailer and original meme stock exited the third quarter with cash and cash equivalents of $1.210 billion, compared with $1.195 billion at the end of the prior quarter.
“If GameStop truly believes in the value of its shares, it should use its excess cash to buy back stock,” Pachter added. Its surging stock price allowed management to raise enough cash to pay off all its long-term debt and have $1.78 billion in cash left over. GameStop’s most recent stock sale completed in June netted the company $1.1 billion for 5 million shares sold. And its debt levels are $424 million lower than the same time last year.
Most of the traders who have been piling into the stock are likely chasing easy profits, and probably do not care whether GameStop’s strained business could make a miraculous turnaround. But, as with so many retail stars, GameStop began to struggle a decade or so ago as gamers, like everybody else, made more of their purchases on the internet, opting for downloaded games or two-day delivery over a visit to the mall. And while past performance is not indicative of future results, the blended approach of employing a multitude of investment characteristics helps alleviate a lot of the risk carried when one uses a single factor.
Quite a remarkable comeback but there is still much more room to grow. On the other hand, GameStop has been relatively clear about its finances and business outlook. The company has kept top-tier auditor Deloitte & Touche since 2013 and frequently updates shareholders in its detailed earnings calls. CEO Matt Furlong is refreshingly straightforward about GameStop’s prospects. In 2022, all that changed when Troika bought out Converge, LLC, an ad tech firm generating around $21 million in profits annually.
Could this turnaround pay off for investors?
The volume of shares being traded had risen to 5.26 million as of this writing, with recent volume averaging about 3.8 million shares. Steve is passionate and dedicated to removing emotional biases from investment decisions. Utilizing a data-driven approach, he leverages sophisticated algorithms and technologies to simplify complex, laborious investment research, creating an easy-to-follow, daily updated grading system for stock trading recommendations.
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But lately it’s been more about inflicting pain on short sellers, hedge funds and other big financial firms. Many talk about it in terms of evening the ledger with the financial elite, who benefited from years of gains as other people fell further behind. The struggling video game retailer’s stock has been making stupefying moves this month, wild enough to raise concerns from professional investors on Wall Street to the hallways of regulators and the White House in Washington. Believing GameStop overpriced, hedge funds had “shorted” the company, betting the share price would fall.
Still, he expressed worry about what comes next — and how GameStop falling will ultimately impact these individual investors and faith in the stock market at large. A few days later, Tyler Winklevoss tweeted a link to reports about the film and said that when the movie comes out he and his brother will be renting AMC theaters (another popular stock within r/wallstreetbets) for “premiere parties.” “It was not because we wanted to stop people from buying these stocks,” Robinhood wrote in a company blogpost. The manager of hedge fund Melvin Capital also on Wednesday admitted to CNBC that the fund was letting go of its GameStop shorts. Sources familiar with Melvin Capital confirmed to ABC News that the hedge fund lost 53% of its total investments in January. “So it started out as kind of a little bit of a value investing story,” he added.
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In other words, it’s a siren’s call for deep-value investors looking for enormous returns. GameStop’s exorbitant valuation is the result of the Reddit meme investors’ fixation on what has become a battleground stock between retail investors and hedge funds. The WallStreetBets investors don’t care about the company’s fundamentals but are focused on creating a short-squeeze to deliver their returns. Ultimately, it’s an investment fraught with danger for regular investors seeking long-term growth. As the tug-of-war between the everyday investors and hedge funds heated up and support grew for GameStop on r/wallstreetbets, the stock skyrocketed more than 50% in the trading session on Jan. 22. During after hours and pre-market trading that weekend, the GameStop continued to climb.
Shares in Robinhood Markets (HOOD, $14.40), whose free app became ground zero for meme-stock trading volume, have slumped almost 20%. The Roundhill Meme ETF (MEME, $11.93) is off 15% for the year-to-date. With the stock now trading north of $23, Palantir is up over 260% over the past year.
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As you can imagine, a short squeeze is bad news for short sellers- but very good news for investors who took a bullish bet on the stock. The short Interest data metric as an investment factor has been the flavor of the year. Historically, it is a pretty poor factor for forecasting long-term performance. https://forexhero.info/ After all, most investors short stocks because it is perceived they have poor investment fundamentals. But during a market cycle of short squeezes, it is a highly coveted data point. For over a year, interest in this data point has run strong and speculator’s enthusiasm does not seem to be slowing.
Gill also posted screenshots of his GameStop portfolio on r/wallstreetbets as far back as 2019. Gill and other members of the forum also cited the bullish GameStop stance of Michael Burry, the legendary trader who was portrayed by Christian Bale in the 2015 film “The Big Short,” as fuel for their investment choices. Other heavily shorted stocks have been seeing a surge of interest recently as investors look for the next GameStop. American Airlines, BlackBerry and other formerly downtrodden stocks have had extreme swings in price this week.
This is an explosive combination and we have found the screen has generated recommendations that have performed very well. Rich Duprey has written about stocks and investing for the past 20 years. Palantir Technologies was called the “best pure-play” in AI and also like AMD, should get its quarter’s worth out of this ride. Where once it was firmly just a government agency numbers cruncher, the big data outfit now is firmly ensconced in the commercial market. Revenue from the U.S. enterprise segment is rapidly rising, shooting 70% higher to $131 million last quarter. It reported more than $1 billion in commercial revenue for the full year.
Many of these stocks have poor investment fundamentals and you do not want to be around when the light bulb goes off and investors realize the stock is not going to perform well in the long run. If you hold too long, you will likely lose because the short squeeze ends, and then the stock price falls; you could lose all of your gains. This past year, the squeezes were so amplified because of the small- to mid-cap companies selected. When a smaller company has an extraordinary trading volume, it is amplified compared to a mega-cap company. The ad tech firm currently trades for a roughly $100 million market capitalization, valuing its shares at about 0.3X price-to-sales (P/S). That’s the same as GameStop’s valuation immediately before its short squeeze and about eight times lower than the average U.S. firm.
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