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What Happened To GameStop’s Share Price On Thursday?

Despite a lack of clarity on the company’s future, investors piled into GameStop yesterday in a bid to prevent a 10% loss in share price.

It’s not exactly Tom Brady v.s. the Atlanta Falcons at Superbowl LI, but GameStop’s (NASDAQ: GME) share price comeback yesterday was nothing short of remarkable. 

Having fallen more than 10% during the session, the company managed to close out the day with a hard-fought 0.2% gain. 

Bigger than Apple?

Ok, ignore that for now. First, let’s figure out why GameStop fell 10% in the first place. 

It appears that the drop’s primary catalyst came from the company’s lack of transparency for the upcoming year, having failed to provide an outlook for 2021 or details on its e-commerce transformation. This, naturally, spooked analysts.

But then, like the climax of the decade-long superhero franchise, investors on Reddit assembled, with GameStop being the most mentioned company on the infamous WallStreetBets forum yesterday. Intent on buying the dip, these Redditors dragged the company back into the green, with 7.5 million shares trading hands — double the trailing 30-day daily average.

But were analysts right to be concerned? 

Yes, because comments from GameStop’s new leadership were ambiguous at best:

“GameStop has two long-term goals: delighting customers and delivering value for stockholders. We are evolving from a video game retailer to a technology company that connects customers with games, entertainment and a wide assortment of products.”

They suggested that GameStop could be spoken about in the same vein as Apple and Microsoft someday. 

It’s hard to fault their ambition, but with the company posting a worse-than-expected loss per share of $0.76 on revenue of just $1.18 billion, there might be a long road ahead. 

Investors should be wary of big moves like we saw yesterday, as they have nothing to do with fundamentals, but are more closely tied to pump and dump tactics.

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