Investors who expect GameStop Inc.’s stock to rise with the latest government stimulus payments reaching bank accounts are likely to be disappointed, according to Curtis Nagle, an analyst at BofA Securities.
Nagle wrote in a research note on Friday that, in collaboration with BofA’s predictive analytics group, he analyzed the potential GME impact of GameStop’s shares,
of the $ 1,400 stimulus payments that are currently being made.
Observing online forums like Reddit, Nagle said that previous sharp increases in the number of conversations involving stimulus and GameStop (GME) appear to coincide with large gains in share prices. But from now on, Nagle, who is pessimistic about GameStop’s actions, said he believes that any positive effect of the “stimuli” has already been exerted.
“[W]We believe that the impact going forward can be limited due to two factors, ”wrote Nagle in a note to customers.
• “Conversations [sic] involving stimuli appear to have peaked and GME’s stock has declined in the past few days. “
• “The number of recent conversations, including GME and stimulus, is low.”
Global Search BofA, ListenFirst
Nagle also pointed out that GME trading volumes have also decreased steadily and uncovered interest rates have fallen “materially”. Nagle reiterated his underperformance rating for the shares and his target price of $ 10.
Turnover averaged 34.5 million shares per day from March to Thursday, after an average of 43.6 million shares per day in February and 66.4 million shares in January, according to a MarketWatch analysis of FactSet data.
FactSet, MarketWatch
And the latest available exchange data showed that interest sold as a percentage of the public float was 26.1%, compared to more than 100% when the Reddit-induced trading frenzy started in mid-January.
GameStop’s shares fell 6.7% in morning trading and fell 29.1% this week. This puts the stock on the right track for a three-week winning streak, in which it shot up 551.6%, followed by a three-week losing streak where it plummeted 87.5%.
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Instead of buying shares, it now seems more and more likely that the current stimulus payments of $ 1,400 and other available monies will be spent elsewhere.
Read More: Student loans, charity accounts and pets – see how readers will do with their $ 1,400 stimulus checks.
“Although we have not researched consumers about how much they intend to invest in the stock market going forward, in our latest Work at Home survey, respondents plan to increase spending over the next 12 months on activities that were restricted by COVID-19, including vacations. , restaurants and travel, as well as investments and home decoration ”, wrote Nagle.
Despite this week’s decline, GameStop’s shares are still up 1,105.0% over the past three months, while the S&P 500 SPX index,
increased by 5.4%.