GameStop (NYSE:GME) is one of the original meme stocks. Retail investors pumping up the flailing video game retailer on Reddit’s r/WallStreetBets forum managed to send GME stock soaring 400% in a week. Shares in the troubled company that were trading in the $4 range in the summer of 2020 hit $325 in January 2021. After the expected correction — GME plunged to the $40 range by mid-February of that year — the stock rallied.
It was a bumpy ride through 2021, but shares managed to spend most of the year priced between $150 and $300. The latest pullback has been less dramatic than others, but it has seen GME stock slide from a $247.55 close in mid-November 2021 to a $93.52 close on Jan. 27.
Since then, GME has begun to rally once again, putting together a two-day, 16.5% streak. Is this a sign that GameStop shares are about to take off again? Does this meme stock deserve a spot in your long-term growth portfolio?
Let’s explore what’s been happening since November with GME.
Q3 Earnings Continued GME Stock Slump
Last November, GME stock hit a six-month high, before beginning one of its frequent pullbacks. That slide continued after the company reported its third quarter earnings.
Revenue was up, growing from $1 billion in Q3 2020 to $1.3 billion. That was a positive. GameStop was stocking considerably more inventory, with $1.14 billion worth of games, consoles, accessories and collectibles compared to $861 million worth the year before. That inventory could be worrisome, but the company explained it away as stocking up for the holidays to avoid supply chain issues.
The company’s net loss for the quarter widened to $105.4 million, or $1.39 per share. In comparison, that loss had been $18.8 million (29 cents per share) the year before.
As InvestorPlace contributor Joel Baglole reported at the time, things had “gone from bad to worse” for the meme stock. The GME stock slump continued into 2022.
Another Hail Mary: NFTs and Crypto
Early in January, it was reported that GameStop was launching a new division focused on non-fungible tokens (NFTs) and cryptocurrency partnerships. Having the meme stock poster child make a big bet on NFTs and crypto was an interesting development. It almost felt inevitable. The move is fraught with risk and adds yet another element for volatility to GME, but has the potential to pay off. At least in the short term.
GME stock saw a bump from the news, but gave that back the next day and then continued to slide. That changed last week, when GME shares began to rally.
Bottom Line on GME Stock
At the moment, GME stock scores an overall “B” rating in Portfolio Grader. It probably comes as no surprise that the reason its scores that highly is its Quantitative grade — there’s still a lot of money being pumped into buying GameStop shares. The stock’s Fundamental grade is a grim “D,” reflecting the reality of the company’s situation. One of the few things keeping that from being an “F” was the fact that the company still has around $1.41 billion in cash and equivalents.
However, reality sometimes takes a long time to land. That “D” doesn’t bode well for this stock’s long-term growth potential. Step outside of the retail investor hype and you still won’t see much in the way of positive expectations for GME from professional investment analysts. But, it’s also difficult to argue against what has happened with this stock since 2020. It has been extreme in its volatility but against all expectations GME stock is still up by more than 2,700% over the past two years.
Who knows, maybe GameStop’s forays into blockchain and NFTs will result in another period of extreme growth for this meme stock.
When all is said and done, I wouldn’t personally look at GameStop as a solid bet. Especially for a portfolio focused on long-term growth. But for investors who are more comfortable in speculative plays, the potential is there for GME stock to defy the professionals and deliver big returns — especially with shares currently priced to reflect a 10-week slump.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
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