What happened
Actions of GameStop (NYSE: GME) and AMC Entertainment (NYSE: AMC) rose 52% and 21%, respectively, Thursday, helping them to recover a significant part of their recent losses.
And
GameStop’s stock fell a third of its value on Wednesday after the video game retailer’s revenue and operating profits in the fourth quarter fell below Wall Street expectations. Analysts were also angry that GameStop did not offer much insight into its digital transformation plan and refused to answer questions during its conference call.
AMC Entertainment fell sharply earlier this week after news that Walt Disney it would make two of its next films available on its popular Disney + streaming service the same day they started showing in theaters.
Traders returned to GameStop and AMC Entertainment on Thursday. Image source: Getty Images.
Some investors apparently felt that the sale was overblown. Bulls undoubtedly was encouraged by the massive increase in the Jefferies Financial Group’s target price for GameStop shares. Analyst Stephanie Wissink increased her stock price forecast more than ten times from $ 15 to $ 175. Wissink postulated that GameStop would successfully transition its business from its physical stores to a primarily e-commerce model, while taking advantage of opportunities in e-sports and collectibles.
It should be noted, however, that GameStop has hired Jefferies to help with a potential offering of shares. Jefferies also owns a significant portion of GameStop’s shares. Still, investors raised GameStop’s stock to $ 183.75, or about 5% of Jefferies’ new target price.
Seeing the GameStop rally probably also helped to boost the feeling of AMC among Reddit merchants and other social media sites. Many individual investors have tried to coordinate their stock purchases on these sites in the past few months, which has helped fuel violent price swings on GameStop, AMC and other so-called meme stocks – companies that have had their shares promoted on the internet – – both on the positive side and to the negative.
What now
By increasing their shares so sharply, investors are betting that GameStop and AMC will not only survive, but will also thrive in a post-pandemic world. Still, GameStop stores still face an existential threat from video game downloads, while fast-growing streaming services like Disney + threaten the long-term survival of AMC cinemas. So, despite today’s high, GameStop and AMC remain high-risk investments.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even our own – helps all of us to think critically about investing and making decisions that help us become smarter, happier and wealthier.