GameStop Gossip Makes GME Stock One to Watch

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  • Hope and hype has cooled considerably, but GameStop (GME) remains the subject of gossip among speculators.
  • While you shouldn’t buy the stock based on the latest rumors, a substantial reason to buy GME could emerge.
  • As potential upside from its e-commerce transformation becomes less heavily priced-in, consider this former “meme king” worthy of a closer look.
GME stock - GameStop Gossip Makes GME Stock One to Watch

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Currently, GameStop (NYSE:GME) trades for less than $26 per share. That’s a far cry from the split-adjusted all-time high for GME stock. As you may recall, at the height of the “meme stocks” trend, shares traded for more than three times their current trading price.

Even as the hope and hype that made GME the “meme king” during 2021 has largely faded, the video game retailer is still the subject of gossip among speculators. One of the most recent bits of gossip, which attempted to throw an investing legend into the mix, briefly gave shares a boost earlier this month, yet has since fizzled out.

While I don’t recommend buying this stock on this rumor, or any other rumor that emerges from Reddit’s r/WallStreetBets subreddit or other forums, with GME’s drop to the high-$20s per share, it may be on the verge of becoming a buy.

GME GameStop $25.42

GME Stock and a Bout of Fanciful Thinking

As InvestorPlace’s Eddie Pan reported on Oct. 18, the meme stock community was buzzing about the possible involvement of a certain Wall Street “icon” in GameStop stock.

That is, based simply on a tweeted photo of GameStop’s Chairman, Ryan Cohen, with billionaire investor Carl Icahn, commenters on r/WallStreetBets were speculating that this was a hint that Icahn was about to team up with Cohen, by taking a position in GME stock.

Put simply, this may be simply the latest bout of fanciful thinking among fans of GameStop shares. Cohen, after activist campaigns at GameStop and Bed Bath and Beyond (NASDAQ:BBBY), may be en route to becoming an Icahn of his generation, but nothing else has come out to suggest the legendary investor wants to get involved with GME.

However, that doesn’t mean there’s zero appeal in buying GameStop after its post-meme pullback. Even if Icahn ends up skipping out completely on this stock (which is very likely), investors who decide to buy on further weakness may not need yet another activist to step in to move the needle. There’s another factor that may be sufficient to eventually send shares back to higher prices.

Roadmap to a Rebound

Besides advising against buying GME stock solely on Icahn rumors, I also recommend not buying this stock based on its still-discussed short-squeeze potential. Falling retail investor enthusiasm for stocks points to a decreased chance of the en-masse buying necessary to drive another squeeze.

So then, what may soon make this former “meme king” a stock worth buying? The potential for GameStop’s fundamentals to improve. Unlike his involvement with Bed Bath & Beyond, which ended after BBBY experienced a meme spike, Ryan Cohen has stayed the course with GME.

Still at the helm, and still its largest shareholder, Cohen has continued to move ahead with his bold turnaround plan for GameStop. Mostly, through transforming the mainly brick-and-mortar retailer into both an e-commerce platform, as well as a major platform in the world of digital assets like non-fungible tokens (or NFTs).

Remember, Cohen made his bones in e-commerce. He made his first fortune by founding online pet supply retailer Chewy (NYSE:CHWY). Its e-commerce transformation has been off to a slow start, but that may be due to today’s challenging economic conditions.

In the coming years, between Cohen’s e-commerce expertise, and a post-recession recovery, GameStop’s metamorphosis may ultimately pay off in the coming years.

Bottom Line on GME Stock

Yes, the “digital transformation” angle isn’t new. This potential catalyst has been at play with GameStop since Ryan Cohen took the reins in 2021. Why does this all of a sudden make the stock worthy of a closer look?

During 2021, and during its short-lived spikes throughout 2022, this catalyst was fully factored into its share price. At current levels, that’s no longer the case.

The market is no longer pricing a GameStop turnaround as a near-certainty. Rather, investors are discounting the chances a turnaround happens at all.

While now is not the time to add GME stock to your portfolio, keep it on your watchlist. Shares could fall to a price where the stock’s merits as a turnaround play become highly favorable from a risk/reward standpoint. With this, the opportunity to make the stock a speculative buy could emerge.

GME stock earns a B rating in Portfolio Grader.

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.


Article printed from InvestorPlace Media, https://investorplace.com/market360/2022/10/ignore-rumor-mill-but-keep-an-eye-on-gme-stock/.

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