GameStop shares plummet, but the analyst still sees potential for compression

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GameStop

stocks fell again shortly after the market opened on Tuesday. Although some short sellers seem to be covering their bearish bets in recent weeks, a short selling expert says he still sees a lot of potential for compression.

The shares fell 19% to $ 178.12 around 10:30 am. These levels are still many multiples above the $ 2.57 low in a year.

Ihor Dusaniwsky, managing director of the short sales analysis firm S3 Partners, said Barron’s on Monday, that his company estimates that about 8.98 million shares of GameStop (ticker: GME) were recently shorted, about 16% of the shares available for trading.

Dusaniwsky said that last month his company saw about 7.5 million short positions covered, meaning that pessimistic investors bought shares to cover their bets. Most came last week, when 4.6 million shares were covered.

“Sales sold at GME are experiencing a short squeeze, and the stock remains one of the best in our potential short squeeze metric, meaning that the squeeze is likely to continue if its share price remains at these levels or higher” , Dusaniwsky added.

The company’s stock soared last week after the company’s announcement that Chewy co-founder Ryan Cohen chaired a committee to turn the retailer into a technology company. Cohen joined the board with two associates in January, kicking off GameStop’s parabolic rise.

GameStop said it will present its fourth quarter fiscal results on March 23. Analysts expect adjusted earnings of $ 1.35 per share, up from $ 1.27 per share in the previous fiscal fourth quarter, according to FactSet. Of course, analysts are much more pessimistic on GameStop than retail investors posting on Reddit’s WallStreetBets forum. The highest price target listed by FactSet is $ 33, while the average goal is $ 14.64.

While short-term results may cool GameStop’s rise, those enthusiastic about the action are looking into the distant future. If the company provides optimistic colors in its e-commerce efforts and the impact of new game consoles, it could make a quarterly error more palatable.

Write to Connor Smith at [email protected]