The stock price of GameStop (NYSE: GME) has seen a significant increase of nearly 40% year-to-date, driven by a broader rally in “meme” stocks. The volatility of the stock has been evident, with its 52-week price ranging from $10 to $65. After-market trading indicates a potential gap-up of over 75% on Monday, June 3, attributed to a screenshot shared by “Roaring Kitty” showing a likely position of $116 million in the company. Keith Gill, also known as Roaring Kitty, was behind a significant short squeeze in GME stock back in 2021.
On a longer-term basis, GME stock has experienced strong gains of 400% from levels of $5 in early January 2021 to around $25 currently. However, the stock’s performance has been inconsistent, with returns of 688% in 2021, -50% in 2022, and -5% in 2023. In comparison, the S&P 500 saw returns of 27% in 2021, -19% in 2022, and 24% in 2023, indicating that GME underperformed the benchmark index in 2022 and 2023.
The Trefis High Quality (HQ) Portfolio, consisting of 30 stocks, has outperformed the S&P 500 each year over the same period. This suggests that investing in a group of high-quality stocks may provide better returns with less risk compared to individual stocks, as evident in the HQ Portfolio’s performance metrics. With the current uncertain macroeconomic environment, it is unclear whether GME will outperform or underperform the S&P over the next 12 months, given the lack of company-specific news to support the recent price rally.
Despite the increase in GME stock, the lack of solid fundamentals and declining revenue raise concerns for long-term investors. The company’s revenue has been on a decline, falling from $6 billion in fiscal 2022 to $5.3 billion in fiscal 2024, while reported earnings improved from $(1.31) to $0.02 over the same period. Analyst forecasts suggest a large 70% downside from the stock’s previous close, indicating a potential risk for investors.
Overall, while GME stock may see higher levels in the near term due to speculations around Keith Gill’s position, it is advised for investors to exercise caution and potentially avoid GameStop amid the lack of solid fundamentals. The uncertain macroeconomic environment, combined with the stock’s inconsistent performance, adds to the risk associated with investing in GME. Investors may be better off considering alternatives with more stable and predictable growth potential.
