“What goes up, must come down,” wrote Isaac Newton centuries ago.
Though the scientist and philosopher was referring to Earth’s gravitational pull, he might as well have been talking about GameStop’s (NYSE:GME) wild rides over the past few years.
The meme-stock pioneer is back in the spotlight, nearly doubling in value over the past three months. The reason: Roaring Kitty, also known as Keith Patrick Gill, is reviving enthusiasm for another round of hype-driven buying.
Back in late 2020, Roaring Kitty, an internet personality, fueled a buying frenzy through numerous social media posts arguing that the stock was undervalued. This sentiment clashed with significant short-selling of GameStop shares, triggering a short squeeze that catapulted prices skyward. Eventually, the situation evened out, and the stock came back down to Earth.
After a hiatus from the public eye, Roaring Kitty has returned with a bang. In May, a cryptic post by Kitty on X ignited a surge of over 350% in the subsequent two weeks. And just last week, Kitty disclosed that he has increased his stake to 9 million shares in the gaming company.
Despite this resurgence, one investor advises caution and recommends sitting this one out.
“Investors that care about their money better avoid this FOMO play at all costs… GameStop is fundamentally a business in decline and one that continues to lose a lot of money for shareholders,” says ‘The Asian Investor.’
However, the investor does not dismiss the possibility that GME could rise in the near future, as over 20% of the company’s stock is currently held in short positions. This situation could lead to another short squeeze as short-sellers are compelled to buy back shares to cover their positions.
However, those seeking long-term value would be advised to look elsewhere. “Investors buying into GameStop at this point have a high chance of losing a significant portion of their capital,” ‘The Asian Investor’ summed up.
Unsurprisingly, the verdict from the investor is a resounding Strong Sell on GameStop shares. (To watch The Asian Investor’s track record, click here)
Wall Street analysts are clearly not keen on spending time assessing GameStop, with only one analyst report in the last three months rating the stock a Sell and setting a 12-month price target of $11.00 – a forecast that implies potential losses exceeding 55%. (See GME stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
