24/7 Insights
- Many investors lose most or all of their investments when stocks run up on speculation and rumor.
- GameStop’s stock has had another crazy run, but the end may be in sight.
When it comes down to it, most companies are measured on financial performance. Even if their stock trades wildly higher or lower, there must be a benchmark. This is true of GameStop Corp. (NYSE: GME). Its revenue has decreased 37% in five years to $5.3 billion, and the company lost money in all but one of those years, which was in 2019. Some people think GameStop shares are junk.
Five years ago, GameStop’s stock traded for just over $1. During crazy speculation in 2021, it hit $81 for a few minutes. Through much of that year, it traded above $40. Recently, it had another run, from $10 to over $20. It fell to earth when management estimated first-quarter revenue of about $875 million, down from the same quarter last year when it was $1.24 billion. To make matters worse for investors, according to The Wall Street Journal, “In a separate filing connected to the shelf registration, GameStop said it has entered into an open market sales agreement with Jefferies, which is acting as a sale agent as it looks to sell up to 45 million new shares of common stock at prevailing market rates.”
GameStop faces two challenges it cannot meet. The first is that people increasingly download games over the internet, and the second is that giant retailers like Walmart compete with it. As its recent quarterly numbers show, Walmart Inc. (NYSE: WMT) remains a massive success—and, incidentally, so is Amazon.com Inc. (NASDAQ: AMZN). GameStop is too small.
Many investors lose most or all of their investments when stocks run up on speculation and rumors. They are drawn to trading because they hear about the people who did well, and it is an excellent way to get burned.
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