GameStop (NYSE:GME) stock is up nearly 30% in 24 hours, on high volume, as the company prepares to announce quarterly earnings on Dec. 6.
Shares that traded for under $12 on Nov. 27 were being sold for over $15.30 before the market opened this morning.
The move brings the market capitalization for the gaming retailer to $4.6 billion.
Traders are betting the stock could jump 50% over the next two weeks. Many are playing call options that would only show a return if the stock hits $22 per share or more.
Why, GameStop, Why Now?
There are early signs that the current holiday season will set records.
But the sudden move in GameStop stock does not appear to be based on fundamentals. Analysts still expect the company to report a loss in its next earnings report and a loss for the year. GameStop has sales of about $6 billion per year and is now selling for about 75% of sales.
By comparison, Walmart (NYSE:WMT) sells for 66% of its sales but consistently shows a profit of roughly 2.5% on sales.
Instead, this looks like a return to the “meme stock” era of early 2021. That January, GameStop shares jumped from under $5 to a high of $81 on pure speculation from small traders, urged on by comments on Reddit.
They seemed to be at it again on Stocktwits, where comments like “to the Moon” predicted a short squeeze ahead. The most recent public data at Fintel showed 22.7% of shares being held short, with over 12 days to cover. Almost 64% of the stock was being held short outside the listed exchanges.
Investor Ryan Cohen put himself in charge of the company in September. He immediately warned employees to become “extremely frugal.” He said he had no time to waste on “delegators and time wasters.” Since then, however, there have been no new growth initiatives.
GME Stock: What Happens Next?
A short squeeze or meme stock wave is fragile. Anyone who gets into GME stock should be ready to sell at any time since the rise is based on sentiment.
As of this writing, Dana Blankenhorn did not hold (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.
