GameStop fans have made it clear that they “like the stock”, and not even the company’s first earnings results since the rise driven by Reddit will change that view.
The video game retailer, the OG meme stock, is expected to disclose its fourth quarter earnings after Tuesday’s close. But while Wall Street is taking a cautious approach to evaluating the traditional company, rocket emojis are apparently not subject to the usual laws of physics and finance. Reddit WallStreetBets board users equipped with “diamond hands” say they’re ready to buy more GameStop GME,
regardless of what Tuesday’s quarterly results say about the fundamentals.
“Damn, this volume is so low,” lamented a Reddit user on Monday morning, analyzing the silent action perceived in the pre-market and concluding that “people waiting for earnings to buy”
That sentiment was echoed by another user when GameStop plunged more than 5% at the start of negotiations, writing that “200 is the new $ 40. Buy before we move to $ 500.”
Tuesday will be GameStop’s first official statement on its financials since the January manic rise caused stocks to rise more than 1,641% in a matter of days, while a horde of traders used social media platforms like Discord and Reddit and apps. free as Robinhood to send GameStop shares “to the moon”.
This rise came despite GameStop’s results in the third quarter of 2020. In December, the company reported that sales fell more than $ 1 billion on a year-over-year basis, down 30.2%, creating enormous interest in discovered in stocks and giving more power to activist investor Ryan Cohen, who publicly shared his view that GameStop’s sales model is old-fashioned and needs to be updated immediately, with a shift to digital sales.
For conventional observers of GameStop’s actions, expectations remain low, but Tuesday presents Cohen’s first opportunity to articulate his vision. Cohen, the co-founder of Chewy Inc., became a member of GameStop’s board of directors in early 2021 and, so far, his communications have been limited to social media memes, including this one in which he tweeted the image of a McDonald’s cream cone: none
And this one, reproducing the comedy film of friends “Dumb and Dumber”:
“Whether they exceed estimates or not is a moot point,” said Thomas H. Kee Jr., founder of Stock Traders Daily. “If they fail to make some kind of announcement, it will be terrible for the stock.”
GameStop is expected to report earnings per share of $ 1.35, or $ 88 million, over $ 2.211 billion in revenue in the fourth quarter, according to the consensus estimates of six analysts consulted by FactSet. These estimates have been falling steadily since October, when consensus estimates predicted earnings per share of $ 1.80 over revenue of $ 2.52 billion in the fourth quarter.
Wedbush Securities analyst Michael Pachter was quoted by the Wall Street Journal as saying that it is impossible for GameStop’s results to reflect its valuation of around $ 14 billion.
“There is no living institutional investor who is thinking of going long [on the stock at] for $ 200, ”said Pachter. “This is not a dot-com that is just beginning.” In fact, GameStop was founded in 1984 in Dallas under the name Babbage’s Etc.
In any case, GameStop’s Reddit army is not subtle in its disdain for hard-eyed Wall Street analysts.
“I have to love all these guys saying it’s over and we sell,” wrote a user at noon on Monday, adding sarcastically: “I’m sure you were the same ones who predicted the first two peaks?”
“It’s okay if we take a dip today,” pondered another user. “It just makes things interesting for the earnings / conference call increase.”
For Kee, a former MarketWatch collaborating columnist, there is a way for GameStop to surprise the market: “Unless they switch to a digital model, they will collapse and fail,” he said.
“They have no way to justify the stock price, but maybe they can get close if they announce some big event, like a pivot for digital.”
Regardless of what GameStop reports on Tuesday, the company set a new standard for watching its equity value move with parabolic volatility between earnings calls, a market phenomenon best summarized by another WallStreetBets user on Monday.
“I learned 99% of what I know about the stock market based on the GME,” wrote the user. “Which means that after GME I will have to relearn everything again, because this does not seem like a normal situation to me.”