GME, Time to buy? or NOT?!

GME has always appeared on every social media person’s investment list. I recently pleaded with readers not to invest in video game retailer GameStop (NYSE: GME) just yet. I argued that GME stock should reach $20 before anyone enters the transaction. Even after a post-earnings bounce, I’m sticking with the wait-for-$20 strategy since GameStop’s financials aren’t as strong as some long-term bulls believe.

Don’t get me wrong: I completely understand the desire to buy GameStop stock and hope for another Reddit-fueled rally. After all, there’s nothing more rewarding than outwitting the affluent short sellers.

Keep in mind that you’re investing in a company, not just stock. Fundamentals matter, and if GameStop cannot demonstrate progress toward profitability, it may be game over for its investors.

Traders in GME stock closed at roughly $22.26 on December 7. The trade volume was high as Wall Street awaited the release of GameStop’s third-quarter 2022 earnings. The following day, December 8, the shares finished at roughly $24.79, representing an 11% rise.

Was GameStop’s quarterly performance so good that they justified an 11% increase in share price? Or, is it likely that some traders were falling into FOMO – fear of missing out? Perhaps, they hoped to catch the next great meme-stock jump before it was too late.

The very next day, Dec. 9, GME stock was already sliding swiftly and moving back toward the important $20 level that I had previously warned you about. It’s a sound technique to select a level with historical support and then patiently wait for the stock to fall to that level before entering a trade.

In any case, clear-minded investors should analyze a company’s financials rather than focus exclusively on a stock’s price activity. Let’s see if GameStop’s quarterly results supported a FOMO rally.

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GameStop Needs to Climb Out of a Hole

Video games are no longer the trendy commodity they were during and soon following the Covid-19 crisis. Furthermore, inflation made it more difficult for consumers to buy video games purchases during the holiday season. Furthermore, the “crypto winter” of 2022 and the bursting of the non-fungible token (NFT) bubble hampered GameStop’s digital-wallet plans.

These and other factors influenced GameStop’s third-quarter fiscal 2022 financial results. As it turned out, the company’s net sales of $1.186 billion fell short of the $1.297 billion achieved in the third quarter of the previous year. Analysts, meanwhile, had projected to see $1.36 billion in quarterly revenue.

In terms of earnings per share, GameStop lost 31 cents per share, compared to Wall Street’s prediction of a loss of 28 cents per share. When we extend the time frame, the scenario appears much worse. GameStop lost $233.8 million in the 39 weeks ending October 30, 2021. Fast-forward to the 39 weeks ended Oct. 30, 2022, and the corporation experienced a net loss of $361.3 million during that time.

Don’t Get Sucked Into the FOMO Trade With GME Stock

GameStop’s financial problems appear to have gotten worse. Be cautious if you want to do anything with GME stock other than flip it for a very short-term deal.

The market might sometimes get it “wrong” by reacting impulsively to a company’s earnings report. In the case of GameStop, there were very certainly some FOMO traders driving up the share price. They may already be regretting their haste. You are not required to join them, as GameStop’s fundamentals do not justify a long share position at this time.

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