GameStop Corp. (NYSE: GME) has baffled investors on Wallstreet after it surged well over 93% in the last week of trading. GME remains extremely volatile, reaching a 52 week high of $159.18 before plummeting back down to $70 a share. Investors have crunched GME’s daily volume, with 197.2 million shares exchanged compared to the daily average 9 million. The surge has been dubbed the “short squeeze of all short squeezes” by Telsey analysts Joe Feldman.With such interest in GME stock, this article will breakdown everything you need to know.
Table of contents
Key details surrounding the GME stock hype
- Short Seller Andrew Left from Citron Research released a video on Thursday explaining reasons why GME stock should be $20 a share.
- Short Selling losses exceeded $1.6 Billion on Friday alone, according to the Business Insider.
- Social media platforms including users on Reddit have reportedly rallied a vast number of retail investors to buy GME stock. The stock is also heavily mentioned on Twitter.
- Consensus amongst Wallstreet analysts suggests a different story. The average 12 month price target from 7 analysts is $11.93 a share. This suggests a downside potential of 87% from the current trading price.
- It is clear GME stock is being fuelled by the new generation of investors, disregarding traditional valuation techniques.
What are analysts forecasting for GME stock in 2021
Firstly, we can see a parallel between what retail investors are valuing GME stock in comparison to financial institutions. Retail investors are looking to speculate on strong gains (technical trends) whilst institutions look for key indicators and price the value of the company respectively. With the additional support from retail investors, it does make it more difficult to predict. However, the following price targets reflect how institutional analysts see the 12 month outlook for GME.
1/25/2021 Telsey Advisory Group – analysts boosted the 12 month price target from $22 to $33 a share. However, the stock was downgraded from Outperform to Underperform.
1/13/2021 Standpoint Research – analysts downgraded GME stock from a Buy to a Hold rating.
12/9/2020 Benchmark – analysts lowered the price target from $6 to $5 a share. Benchmark have a Sell rating on GME stock. It is worth noting the company was trading at $13 a share at the time.
Which institutions are buying GME?
Firstly, for the first quarter of 2021 so far institutions have bought more GME stock than sold. In fact, institutions have bought four times more than they have sold according to MarketBeat data. However, the larger shareholders of GME such as BlackRock and Vanguard have sold 23% and 38% respectively for the reported quarter. Conversely, Morgan Stanley added GME shares increasing their holdings by 900% for the quarter (reported 11/13/2020).
We remind our viewers that this is not financial advice. Instead, the information above is an investment commentary from extensive research.
In conclusion, it is clear retail investors are speculating on GME stock whilst analysts cannot see the sense in the current valuation. Furthermore, analysts 12 month price targets are far off the current trading price. It is unclear how GME will continue to play out, however short squeezes do not last. Investors speculating on GME stock must understand the fundamental valuation when incorporating a risk strategy. In saying this, what we are seeing is quite extraordinary and represents the influence of social media on stock performance.
Written by Tyger Fitzpatrick, Founder of Youth Investment Group.
The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
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