Investing in GameStop Corp. (GME) stock is a great way to diversify your portfolio, especially if you like video game stores. The company is headquartered in Grapevine, Texas, and is the largest gaming merchandise retailer in the world. So whether you’re interested in buying video games or other items for your home, you can find them at GME.
Price Target
Despite GME’s recent missteps, it still has some fans. The stock has been hovering around the $100 mark for nearly a year. The store is also one of the most shorted stocks on Wall Street. The question is whether or not the company can continue to thrive at the present growth rate.
GameStop is undoubtedly an excellent stock to own, but the company’s performance has been a tad disappointing. The company reported a net loss of $673 million in the fiscal year that ended February 28 and is forecasting a net loss of $470 million in the coming years. The company has not been in the top echelon of the video game business for quite some time. As a result, the company’s valuation has taken a hit. In late May, Bank of America analyst Curtis Nagle suspended stock coverage. Luckily, the firm’s stock has recovered a bit.
Short squeeze
During the first half of 2021, GME stock experienced multiple sharp upticks and downticks and a spike in short interest. The number of shares sold short reached a peak of 138% of the public float at one point.
However, despite the short interest, the price of GME did not return to its pre-squeeze levels. Instead, it rose to $120 after the split and has never returned to its pre-squeeze levels.
Short-selling hedge funds continue to bet heavily against GameStop, even after the company reported first-quarter financial results. The company’s short interest has risen 63% over the year, according to research by MarketBeat. The price of GME remains above its 2021 value, but investors should watch for signs of a short squeeze.
A short squeeze is a market phenomenon that occurs when a stock’s price increases, so brokers and market makers begin to buy and sell shares to cover short positions. The higher the days-to-cover metric, the more difficult it becomes for a short seller to protect their work.
Correlation to the SPY ETF
Investing in the SPY ETF is a great way to diversify your portfolio. It is designed to match the performance of the S&P 500 index, which is considered the definitive measure of the United States stock market.
The S&P 500 is a benchmark for trillions of dollars in investment. It tracks the largest publicly traded companies in the U.S. These stocks perform well in some years and poorly in others. The SPY ETF is a large-cap blend fund that invests in all S&P 500 stocks. It is available in a variety of shares, including fractional shares.
For a long-term investor, you need to understand how correlation works. Ideally, you want to hold an ETF that is not closely correlated to the SPY ETF, which will give you more excellent diversification benefits. It would be best if you also considered the expense ratio and tracking error of the ETF.
By checking out the chart below, you can find out how well the SPY ETF and other ETFs have historically correlated to each other. The black line represents the percentage change in the ETF, while the red arrow indicates the correlation of the ETF with the SPY.
Most recent earnings
During the last quarter, GameStop (GME) reported an EPS loss of $95 million. Analysts expect the company to report a loss of 28 cents for the third quarter. A positive third quarter could boost GME stock and allow the price to break out of its recent range.
In the past, the stock peaked in September, dropping to a low of $28. The stock has since been drifting in a consolidation range between $22 and $20. The following earnings report is expected to be released on Wednesday. Investors are eager for a turnaround in the second half of the year.
The company reported a loss of $105 million in the first half of the year. It has been working to improve the brick-and-mortar retail business and focus on digital initiatives. It is also focusing on cost-cutting measures. The company laid off employees earlier this year. It plans to continue these measures to strengthen its balance sheet.