What Happened to GameStop?

PHOTO CREDIT: Game Stop

OVERVIEW

Why You Should?

  1. GameStop might benefit off more stimulus checks. These stimulus checks offer people in the United States with more disposable income. People can then use this disposable income to purchase some video games and/or other products related to this sector. This will benefit the company and help the company’s recovery from this pandemic. This might also benefit investors in the company.

Why You Should Not?

  1. The COVID-19 Pandemic has caused the demand for video games to soar. Unfortunately, GameStop has not been able to capitalize on this demand like other companies have. This is because of their weak e-commerce footprint and the dependency on in-store shopping. This has hurt the company’s results during this pandemic and might continue to hurt the company in the future.
  2. Last week, GameStop’s stock price soared due to an apparent short squeeze. Put simply, GameStop investors bought a ton of stock in order to “squeeze” short-sellers. This is an extremely short-term phenomenon and does not mean that the company is performing well. In fact, the stock price might fall significantly due to this event. This will hurt investors in the company.
  3. In my opinion, there are better retailers to invest in. GameStop might not be around much longer given the company’s past financial performance. If they are here to stay, they will need to make massive investments to stay afloat and turn the business around. I would go to companies like Walmart and Amazon with my investment capital.
  4. Due to the reasons mentioned above, the company has been reporting a drop in both profits and revenues over the past couple of financial years. This has hurt the company’s ability to make investments to position itself for the future of retail These dismal numbers have also hurt investors in the company. In the financial year of 2020, the company reported revenues of around 6.47 billion and a loss of around 470.9 million. In the financial year of 2019, the company reported higher revenues of around 8.29 billion but a larger loss of around 673 million.
PHOTO CREDIT: GameStop

MY OPINION

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Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.

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Aaditya Patel

Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.