Writing about GameStop (NYSE:GME) stock is never my favorite thing to do. It’s not because I dislike the company or the product — I’ve spent plenty of my hard-earned cash there over the years. It’s because I don’t think that the stock behaves rationally.
Case in point: GameStop stock was less than $100 in early January, and I was declaring the stock a certain loser. And it was about time — the company’s stock blew up in the spring of 2021 when retail traders on the Reddit r/WallStreetBets subreddit rallied around the company and tried to execute a short squeeze against hedge funds that bet against the company.
It was a great story that captured a lot of attention when people desperately needed something to focus amid the Covid-19 pandemic. And while GME stock never sustained its jump from $20 to nearly $500, it still managed to be incredibly overvalued over the next few quarters.
Even now, the stock’s fundamentals aren’t great — but they are better than they were a couple of years ago. Revenue in the fourth quarter came in at $2.25 billion, which beat analysts’ expectations for $2.22 billion. The company still posted a loss, however, of $1.86 per share.
For all of 2021, GameStop posted revenue of more than $6 billion while losing $381 million for the full year. And it ended the year with more than $1.2 billion in cash and cash equivalents.
But there’s reason for hope. And I don’t say that lightly.
First of all, GME stock is up more than 3% today as it’s again showing some resilience by bouncing off the $140 resistance level yet again. GameStop stock spiked late last month to nearly $200 when the company announced plans for a stock split to be paid via dividends. And while it didn’t remain close to $200, it hasn’t fallen back to its lows from late January, either.
On top of that, GameStop Chairman Ryan Cohen made news in March when he bought 100,000 shares of GME stock for $10.2 million, giving him an 11.9% stake in the company. Cohen, who is the former CEO of Chewy (NYSE:CHWY), has a lot of admirers on Reddit, StockTwits and other forums.
Do I think GameStop is a great stock to buy? No, not at all. But I’m also starting to think the r/WallStreetBets apes are going to keep this ride going for the foreseeable future. GameStop stock may even manage to end the year in the black.
That would be a huge achievement for both the Reddit crowd and for GameStop’s board.
On the date of publication, Patrick Sanders did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
