Gamestop (GME) Stock Price and Forecast: Why is GME falling?

Gamestop (GME) Stock Price and Forecast: Why is GME falling?

GameStop stock falls over 4% on Friday as indices tumble.

The meme stock now looks increasingly bearish on the charts.

GME shares fell after earnings release last week.

GameStop (GME) is losing its crown as the meme-stock king with a fall of over 4% on Friday. AMC on the other hand just keeps on rallying, closing up above $50 for the first time since July (see more).

GME stock has been struggling for form since releasing results last week, after the close on September 8. The results were mixed with the Earnings Per Share (EPS) number missing estimates but revenue coming in ahead of estimates and showing steady progress. However, investors in GameStop were frustrated by any lack of clarity on the post-earnings conference call as to potential turnaround plans for the business. Ryan Cohen has been tasked with doing for Gamestop what he did for Chewy (CHWY), but Cohen had hinted in the summer that he would not be detailing plans as he did not want to let competitors know the plans for GME. Not providing earnings guidance going forward will also likely have hit investor sentiment in GME.

AMC has teased some form of partnership with GME but no more details have been forthcoming. AMC CEO said last week that they had made contact with GameStop. Social media volume was high after the GME results, but the volume of mentions on social media appears to have dropped off if the latest Refinitiv data is to be looked at.

GME key statistics

Market Cap $14.3 billion Price/Earnings -181 Price/Sales 2.7 Price/Book 31.3 Enterprise Value $11 billion Gross Margin 0.24 Net Margin -0.02 52 week high $483 52 week low $4.56 Average Wall Street Rating and Price Target Sell $88.33

GME stock forecast

GameStop had formed a bullish continuation flag after meme stock day on August 24. This was a day when many meme stocks rallied strongly with GME up 27% and AMC up over 20% that day. However, the continuation phase had been taking too long, which was understandable with investors waiting for results. Now that results are out of the way the bullish impetus created by the August 24 move and the continuation flag pattern has ended.

Gamestop now finds itself in heavy volume traffic as we can see from the point of control at $178.97. This is the large consolidation phase we have highlighted. Each price spike finds support in this range from $180-140. Our buy-the-dip zone is at $150, this is high volume and the 200-day moving average will be at this level shortly.

Neutral at current levels, bearish below $146, bullish above $230.

Stocks making the biggest moves midday: Moderna, Lululemon, GameStop and more

Moderna’s sign is seen outside of their headquarters in Cambridge, MA on March 11, 2021.

Check out the companies making headlines in midday trading.

Moderna — Shares of the drug maker rose 7.8% after announcing it’s developing a two-in-one vaccine booster shot that protects against both Covid-19 and the seasonal flu. The new vaccine, which the company is calling mRNA-1073, combines Moderna’s current Covid vaccine with a flu shot that’s also under development, according to a press release.

Lululemon — The athleisure brand jumped 10.5% and hit an all-time high after reporting strong second-quarter earnings and said it’s on track to hit a 2023 revenue target ahead of schedule. The company has outperformed other retailers during the pandemic and is poised to continue to even as people return to offices.

GameStop — Shares of the video game retailer pared losses from a steep post-earnings sell-off to close 0.2% higher as retail investors rallied around the Reddit favorite. GameStop fell as much as 10% before punching back into the green intraday. The company posted a narrower loss in the second quarter compared with a year prior and rising sales. The retailer was light on providing an outlook for the upcoming quarters and details on its e-commerce transformation, which disappointed Wall Street analysts. The meme stock favored by Reddit traders is still up over 900% this year.

Boston Beer — Shares of the alcoholic beverage lost 3.8% after it pulled its earnings guidance late Wednesday amid a slowdown in sales of its hard seltzer brand Truly. That development came just a few weeks after the company blamed weaker-than-expected second-quarter earnings on poor Truly sales, leading it to cut its full-year forecast.

RH — Shares of the furniture retailer popped 7.8% after beating on the top and bottom lines of its quarterly results. RH earned $8.48 per share, topping estimates of $6.48 per share, according to Refinitiv. Revenue came in at $988.8 million, above expectations of $975.4 million.

Caesars Entertainment — Caesars shares gained 0.7% after the company announced it will sell the non-U.S. assets of its William Hill sports betting unit to British gambling firm 888 Holdings. The deal is worth about 2.2 billion pounds, or roughly $3 billion.

NetEase — Chinese regulators summoned NetEase and other gaming companies to remind them of restrictions on game time for children. Shares of NetEase retreated 2.1%.

Analog Devices — Analog Devices shares added 3.1% after the company announced its acquisition of rival chip maker Maxim Integrated Products is expected add to adjusted earnings in 12 months after closing, six months sooner than previously expected. Analog Devices said it expects the acquisition to be neutral to adjusted earnings in fiscal 2022.

Macy’s — Shares of the retailer gained 1.9% after Cowen upgraded the stock to an outperform rating, saying the stock can jump almost 30%. The firm pointed to the retailer’s digital push, as well as product innovation and pricing management as factors that will drive upside. Shares of Macy’s have nearly doubled this year.

Ford — Shares of Ford dipped 2.1% after the automaker said it would end vehicle production in India, costing about $2 billion. The company is shutting down two large plants in the country and about 4,000 people are expected to lose their jobs.

Blade Air Mobility — Shares of Blade surged 18.8% after JPMorgan said the aerial ride-sharing company could be the Uber of the skies. The firm predicts an 80% rally ahead for Blade and believes the aerial ride-sharing market could be worth tens of billions of dollars within a decade.

Leslie’s — Shares of Leslie’s rose 3.2% after Stifel initiated coverage of the pool stock with a buy rating. The firm said the stock is currently undervalued as Leslie’s is poised to “build upon its leading market share” in the pool and spa market.

— CNBC’s Pippa Stevens, Yun Li, Maggie Fitzgerald and Tanaya Macheel contributed reporting

Disheartening GameStop (GME) Earnings, r/WallStreetBets Traders Buy The Dip

GameStop’s GME, the prodigal son of retail equities amid the retail apocalypse, saw its shares dropped off a 10% cliff out of the gates Thursday morning following a rather disappointing earnings call the prior evening. GameStop missed EPS estimates by a mile, but the biggest disappointment was its lack of guidance regarding its ostensibly ambiguous “transformation” plan.

However, this rational morning dip was quickly bought up by the seemingly irrational cohort of r/wallstreetbets (WSB) traders (though they did utilized its 50-day moving average, which became a technical support level). This group of nostalgic market-moving traders drove GameStop up thousands of percentage points this year, allowing the firm to raise over a billion in cash through seasoned equity offerings. However, as of now, it looks to be burning a hole in the company’s pocket, with an inability to turn a profit with its current business model and no guidance on a new approach.

Ryan Cohen, the ‘visionary’ activist investor with aspirations to drive growth back into this antiquated retailer, is yet to show investors how he plans to do so. With no plan in place, GameStop may run out of money before any operational shift can even be made. I would steer clear of this gambling apparatus.

Value Buy

On the other hand, Best Buy BBY had an excellent July quarter, blowing analysts' estimates out of the water and demonstrating another record set of Q2 results. Best Buy solidified its market control of consumer electronics in the retail space amid the pandemic, as its smaller (less liquid) competitors dropped out of the market.

Best Buy has shown excellent operational efficiency in the past 12 months with double-digit sales growth that flowed down in a margin-expanding fashion to even more significant earnings growth. BBY just exhibited its largest operational margins in the stock’s over 2-decade history, with digital omnichannel options shaping up to be a strong profit driver. As the world went remote, there was a significant amount of pulled forward demand. Still, consumers' progressing penchant for the latest tech will continue to power this leading consumer electronics retailer through the Roaring 20s.

BBY represents an excellent value buy after more than a year of sideways trade, which has compressed its valuation multiples (earnings appreciating as share price remains the same). Its current forward P/E sits at 11.5x, which is sizably below both its industry and 5-year averages of 19.9x & 13.5x, respectively. BBY’s recent trading slump sets it up for attractive upside potential.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Best Buy Co., Inc. (BBY) : Free Stock Analysis Report

GameStop Corp. (GME) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research