GameStop: ‘Roaring’ Return Fades (NYSE:GME)

Thesis summary

GameStop Inc (New York Stock Exchange: GME) just reported expected earnings results just as the stock was experiencing another short squeeze.

Roaring Kitty, credited with initiating the original GameStop squeeze, is back From his large long position in the stock, perhaps helping with this latest move.

The stock was priced at over $60 before it hit the market, making Roaring Kitty a potential billionaire, but the expected results, which included missing revenue and earnings per share, threw a jug of cold water at the rally, with GME shares now trading lower.

As far as I can see, this time, the shorts will be a disappointment.

GameStop Saga Part 2

The short squeeze in GameStop returned two weeks ago, and after stalling, it was reignited this week.

Inventory It exploded on May 15 just as signals on Wall Street Bets (which we can see at the bottom) also rose to over 1.8 million.

The gathering calmed down after a few days, but then resurfaced when Roaring Kitty entered the scene.

After three years of silence, Keith Gill (Roaring Kitty) revealed his large position in GameStop last Sunday, consisting of stock and call options. By Monday’s opening, the center was valued at more than $386 million.

In fact, estimates suggest that at $65 per share, which is what GameStop was close to during today’s pre-market, Gill’s position would be worth more than $1 billion.

The trader-turned-online-celebrity has become active on social media again, and in fact has a live broadcast scheduled for today.

Unfortunately for Roaring Kitty, it looks like he’s not going to be a billionaire today. As I write this, just before the market open, GME has given up all of its pre-market gains, which are now down about 10%.

But who knows what the open market will bring.

Earnings results. Why?

In a surprise move, GME, which was scheduled to announce its earnings results on the 11th, released them in advance.

The company’s sales fell to $881.9 million, although this actually resulted in a smaller operating loss and better earnings per share year over year. GME lost $0.11 per share compared to $0.17 for the 13 weeks ending April 29, 2023. The company also has just over $1 billion in cash and marketable securities.

GameStop management will not hold a conference call today.

Here we must ask ourselves this question: Why ?

Why did the administration decide to publish the results early? The most logical answer would be that the company wanted to capitalize on the hype generated by Roaring Kitty and the upcoming live stream. Well, if that was their intention, it certainly backfired.

The stock has lost all of its pre-market gains. And again I ask why?

It’s not as if fundamentals are driving this stock in any way. I don’t think a lot of people actually look at the lost earnings and think, “Oh yeah, that’s not worth $60 a share anymore.”

So why sell?

Sometimes the expectation is much better than the reality. With GME’s earnings results still awaited for another week, there was plenty of room for speculators’ imaginations to run wild. However, they now have to deal with the harsh reality that GameStop doesn’t have anything new to offer. This is still just a falling company.

With that in mind, I wonder; Was selling exactly what these early profits were intended to do?

Unfortunately, that’s not a question we can really answer right now

Is GME a buy?

So, with GME selling off right now, you might be tempted to buy some at the open price. It has already been compressed twice in the last two weeks. Maybe there’s room for a third round?

Before you get ahead of yourself, keep a few things in mind.

This time, the percentage of stocks sold short was much lower than in 2021. This limits the potential for a short squeeze significantly.

On the other hand, note that this second squeeze was accompanied by a much smaller peak in interest from the WSB crowd, as shown in the aforementioned bottom. Meanwhile, trading volume appears to be reaching a similar level to what it was on May 15.

Final thoughts

However, we’ll have to see if Roaring Kitty’s reappearance will make a difference this time. There is no doubt that today’s market opening will be a make or break point for the stock. The adage first coined by Anthony Weldon in 1650 comes to mind.

Fool me once, shame on you; Fool me twice, shame on me.

But which side will the fools be on this time?