Should I Buy GameStop (GME)? Finance YouTuber Analysis

The YouTuber strongly advises staying away from GameStop, arguing that its business model is fundamentally challenged by the ongoing shift of gaming online. He dismisses any positive developments as 'accounting tricks' rather than tangible improvements to the long-term business, and does not foresee a return to in-store gaming.

“It's one I'm staying far far away from. Hopefully, you guys are staying far away from as well.”

The YouTuber strongly advises against GameStop for long-term investors, labeling it a 'bad business' with aimless management in a dying industry. He dismisses speculative 'moonshot' ideas like acquiring eBay as 'shenanigans' that ultimately harm shareholders, drawing parallels to AMC. He suggests it might only be suitable for short-term trading, which is not his channel's focus.

“This is not a long-term buy and hold by any stretch of the imagination. So unless you want to play those games, I would stay far far away from that stock.”

The YouTuber strongly advises against GameStop, calling it a 'dying business' that will not perform well in any economic climate, especially a recession. He dismisses the 'ultimate squeeze' narrative and finds its high ranking among retail buys baffling.

“Do you want any part of GameStop's business during a booming economy? Probably not. It's a dying business. Do you want any part of it during a recession? That's a definitive no.”

The YouTuber categorizes GameStop as a 'dump it' due to its poor business fundamentals, declining earnings, and its nature as a meme stock. He warns that while some may profit, the majority of retail investors are likely to get 'burned' in such speculative trading.

“GameStop same exact thing it's the same exact thing as AMC it's a terrible business there's nothing positive there earnings are going down everything's going down it's strictly a um you know Wall Street bets mem stock type of trade of some sort there”

The YouTuber sees GameStop as a high-confidence short-term trade, noting its historical pattern of rallying after debt offerings cause a dip. He highlights its strong retail investor support, cash-flow positive status, and significant cash reserves, suggesting the recent dip after convertible note issuance is a buying opportunity.

“Shares are now near their one-year low, and the company could be planning something big. GameStop is still cash flow positive, and with $6.4 billion cash on the balance sheet, it doesn't need another two and a quart billion. In fact, the announcement does say that the funds will be used for investment. So, I like the upside back to $30 on this.”

The YouTuber assigns GameStop a 'hold' rating based on a mixed bag of indicators. While there's strong recent price and volume momentum, social sentiment is weakening, the Relative Strength Index (RSI) indicates it's overbought, and valuation is considered expensive. Upcoming earnings also present a risk of disappointment.

“So, taking all those near-term factors together, strong price and volume momentum to the upside, but weakening social sentiment, an overbought RSI indicator, and an expensive valuation, feeding these into our investor momentum index, get a score of 62 out of 100, firmly in the hold zone.”

The analyst argues that GameStop's retail business is dead, with declining revenue and consistent losses since 2018. While the company has significant cash reserves, the board's decision to invest this cash in stocks, giving CEO Ryan Cohen full control, is seen as an 'insane and alarming move' that turns GameStop into a risky hedge fund without a proven track record for investment returns.

“to be honest I got to agree with wed Bush analyst Michael practor in calling this kind of an innan and alarming move for investors because to potentially not have that cash available for the company when it is burning through 300 million a year unless Cohen can turn these into fast profits basically turns GameStop into a hedge fund”

The YouTuber notes that GameStop has a strong cash position due to past share issuance, providing it with time to survive. However, he expresses concern that management lacks a clear plan for the company's future, particularly regarding its e-commerce and crypto ventures, which could hinder long-term growth.

“GameStop has the time but the problem here is it doesn't really look like management knows what it wants to do.”

The YouTuber suggests GameStop could experience another short squeeze if it reports any positive news after its upcoming earnings, noting that short sellers are back to 21% of shares outstanding. Despite its lack of profitability, the company has a strong net cash balance sheet due to past share issuance, making it more resilient than other meme stocks.

“Short sellers are back to 21 of these sales shares outstanding uh so I'm thinking you know any kind of good news any news other than bad could be another short squeeze for this stock.”

The YouTuber believes GameStop is poised for a significant move after the upcoming FOMC meeting. He observed 'test runs' in after-hours trading where the stock briefly touched $41.27, indicating potential upside. He suggests buying if the price drops to $20 or $19, as the after-hours activity showed where buyers stepped in.

“I told you around here our price Target is $60 but we will have a battle at 49 through 45 okay so expect that but look for both of those all right now this is something that will come into play guys over the next 72 hours okay we got to get past Wednesday fomc meeting in order for this to potentially begin begin to take shape.”

The YouTuber believes GameStop is poised for a significant rally, potentially reaching $60 next week, driven by renewed retail investor interest following Roaring Kitty's return. He suggests buying if the stock dips to around $20, viewing it as a strong support level before a rebound. He also notes potential resistance between $45-$49 on its way to $60.

“next week if it if there's a little more weakness okay if they push it down I want you guys to be looking for 20 as a base it might overshoot so let's say 18 and 19 okay but I'm just going to call it 20 and then it's going to Ricochet back to $60 okay”

The YouTuber recommends buying GameStop for a quick profit, citing the renewed interest from 'Roaring Kitty' which has historically driven meme stock surges. He warns that the rally will be temporary and advises setting a realistic target and exiting the position promptly, with a price target of $35.

“I got a $7 price Target on AMC and then GameStop could easy go to 35 all right from here it can these things can go a lot higher but I want you guys to do me a favor okay one temper yourself meaning shoot for a realistic Target and get in and get out”